Effects of the transactions on the accounting equation

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Reference no: EM131302435

Question 1

According to which of the following accounting concepts, even the proprietor of a business is treated as creditor to the extent of his capital? Also, explain the concept with an example.

i) Money Measurement Concept

ii) Dual Aspect Concept

iii) Cost Concept

iv) Business Entity Concept

Question 2

Times of Oman reported the financial result of Belgium Aluminium Company, Muscat.

Times of Oman

Muscat: Belgium Aluminium Company (BAC) has reported a growth in net profit and revenue for the quarter ending March, even as profit and revenue for the financial year 2014-2015 slipped. The company has predicted a growth of 35-40% in net profit and 30-35% in sales for the next financial year.

BAC has posted a 28.3% drop in net profit for the financial year 2014-2015 to OMR 32.6 million, while revenue dipped 5% to OMR 200.2 million during the same period. The company also registered a marginal increase in its net profit for the quarter ended March at OMR 11.4 million, as against OMR 10.2 million during the same period last year. Revenue for the quarter also rose by 8.6% to OMR 59.8 million. The company has recommended a dividend of 45%.

i. Discuss the reasons for BAC to predict a growth in Net Profit and Sales Revenue for the financial year 2015-16.

ii. Also identify the individuals or groups who are likely to be interested in the above given news report and explain why they may be interested.

Question 3

After four months of operations, Disney Video Company had the following account balances. Cash OMR 7,000.

Account Receivable OMR 1,000.

Office Supplies OMR 500,

Video Cassettes OMR 42,000,

Account Payable OMR 9,000

Share Capital OMR 41.500.

The following transactions took place in May, 2016:

3-May Purchased video cassettes for cash 5000
4-May Received cassette hire charges 15000
6-May Paid shop rent 1000
10-May Paid assistant's salary 800
11-May Collected from customers billed previously 400
14-May Purchased office supplies for cash 200
15-May Purchased video cassettes on credit 2000
20-May Made part payment of purchases on May 15 1000
22-May Paid telephone charges 300
25-May Paid payables due at the beginning of the month
30-May Declared and paid dividends 4000

i. Use Accounting Equation to show the effect of the above transactions on its assets, liabilities and capital.

ii. Analyse the effects of the transactions on the accounting equation.

Question 4

Record the following details of Black and White Limited and extract a trial balance as at 30 April 2016.

Black and White Limited commenced business on 1st April 2016 with a capital in bank of OMR 4.000. His transactions during April were as follows-

3-May Purchased video cassettes for cash 5000
4-May Received cassette hire charges 15000
6-May Paid shop rent 1000
10-May Paid assistant's salary 800
11-May Collected from customers billed previously 400
14-May Purchased office supplies for cash 200
15-May Purchased video cassettes on credit 2000
20-May Made part payment of purchases on May 15 1000
22-May Paid telephone charges 300
25-May Paid payables due at the beginning of the month
30-May Declared and paid dividends 4000

i. Pass Journal entries for the above transactions of Black and White ltd.

ii. Post them to the appropriate Ledger Accounts

iii. Prepare Trial balance from the ledger balances

Reference no: EM131302435

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