Mgt 205 Assignment.docx

Assignment 2 MGT 205: Fundamental of Accounting Q1.

On January 1, 2019, Mr. Butt started a wholesale clothing business under the name of ‘Butt Cloth House’. The business transactions for May are shown below. May 1 Mr. Butt invested $650000 cash in the business. May 1 Borrowed $250000 from bank; repayable after 3 years. May 2 Building were purchased for $425000. Half of the amount was paid in cash and a note payable was issued for a remaining balance. May 9 Furniture was purchased for $7000 from ‘Decorators Pvt. Limited’. Mr. Butt paid $2000 at the time of purchase and agreed to pay the entire remaining balance in 15 days. May 10 Office equipment were purchased for $15000 cash. May 13 Cloth, for resale purpose, were purchased on credit amounting $120000. May 15 Sold cloth to ‘Ali Cloth House’ for $85000 on ten days credit. May 20 Sold cloth to several retail businesses for $75000 cash. May 24 Paid remaining balance for furniture purchased on May 9. May 25 Received cash from ‘Ali Cloth House’ for medicine sold on May 15. May 28 Received a $400 invoice for several radio advertisement aired in May. The entire amount is due on June 5. May 30 Paid interest on loan borrowed from bank amounting $200. May 30 Paid employees $3500 for salaries earned in May. May 30 Received rental income amounting $3000. Required: a) Prepare journal entries for each transaction. b) Post each transaction to appropriate ledger accounts. c) Prepare Trial balance.

Q2. Q3.

Define ‘accounting cycle’. Explain different stages of ‘accounting cycle’. Define ‘accounting equation’ and illustrate it with examples.

P.T.O

Q4.

Following adjusted trial balance relates to Khan Enterprises for the year ending 31 December 2018. Dr. Cr. Building 5000000 Land 1500000 Furniture & Fittings 250000 Debtors/Accounts Receivables 70000 Sales/Revenue 750000 Purchase 250000 Capital/Owners’ Equity 5000000 Creditors/Accounts Payables 125000 Long term Loan 1800000 Accrued Advertisement 5000 Cash in Hand 50000 Cash at Bank 500000 Deferred Revenue 40000 Carriage Inwards 30000 Utility Expenses 2500 Salary Expense 95000 Insurance Expense 25000 Advertisement Expense 15000 Rental Income 20000 Rent Receivables 10000 Bank Overdraft 77500 Prepaid Insurance 20000 Total 7817500 7817500

Required: From the above adjusted trial balance, you are required to prepare ‘income statement’ and ‘statement of financial position’.