Question

THE ACCOUNTING EQUATION
M Juma started his own business, MJ Stores. He uses the continuous inventory system.
The following transactions took place during April 2019:
1. M Juma withdrew R50 000 from the business’s current bank account and deposited it in
his personal bank account to reduce his capital contribution.
2. Invested R100 000 as a fixed deposit at NB Bank at 8% interest per annum.
3. Purchased merchandise on credit from JB Traders for R3 500 less 10% trade discount.
JB Traders also charged a delivery fee of R420 on the invoice.
4. Sold goods on credit to N Costa, R9 100. The markup on cost was R2 600.
5. An allowance of R1 360 was given to N Costa for damaged goods supplied to him. The
markup on cost was 25%.
6. The owner took stock for his son’s use. The selling price of the goods was R2 240 and
the cost price was R1 600.
7. According to the bank statement received on 30 April 2019, bank charges for the month
totalled R380.
8. Received R800 from NB Bank as interest on fixed deposit. Interest is not capitalised.
Required:
Analyse and record the above transactions according to the format in the answer book
provided.
Note: Assume that the bank balance is always favourable.

Answer 1

Answer:-

		Assets	=	Liabilities	+	Equity
During April 2019	Transaction	Bank	+	Fixed Deposit	+	Inventory	+	Accounts Receivable	=	Accounts Payable	+	Capital	+	Revenue (Profit)
1	Withdrewn for personal use -Drawings	-50,000	+	-	+	-	+	-	=	-	+	-50,000	+	-
2	Invested in Fixed deposit at NB Bank	-1,00,000	+	1,00,000	+	-	+	-	=	-	+	-	+	-
3	Purchased mechanside on account (3500 - 350 = 3150) & (3150 + 420 = 3570)	-	+	-	+	3,150	+	-	=	3,570	+	-	+	-
4	Sold goods on credit	-	+	-	+	-6,500	+	9,100	=	-	+	-	+	2,600
5	Allowance for damaged goods supplied 1,360 * 20% = 272	-	+	-	+	-	+	-1,360	=	-	+	-	+	-272
6	Stock utilised for personal use -Drawings	-	+	-	+	-1,600	+	-	=	-	+	-1,600	+	-
7	Bank charges	-380	+	-	+	-	+	-	=	-	+	-	+	-
8	Interest on Fixed deposit	800	+	-	+	-	+	-	=	-	+	-	+	800