Find the total expenses of Diraku Fashion

Assignment Help Accounting Basics

Reference no: EM132737220

Question - Diraku Fashion commenced its business on 1 January 2017 with an objective to offer fashionable and up-to-date attires at an affordable price. The business belongs to Miss Dhia who has 10 years' background in fashion and also holds a diploma in fashion and design. The business also offers cosmetics and jewelries products to complement its clients in fashion.

Miss Dhia contributed RM75,000 to start up the business. Besides personal investment from the owner, the business obtained RM200,000 10-year loan from BMM Bank with 7% annual interest. A small and cozy shop was bought on 1 April 2017 for RM100,000. Miss Dhia paid RM50,000 cash while the balance was financed by a five-year loan from PAM Bank at an annual interest of 6%. The business also bought a second hand car costing RM30,000 for business purpose by cash.

Due to overwhelming response from its clients, the owner foresees her business to be in operation for a very long time. She has a vision that it will grow in size with branches scattered all over Malaysia with "Diraku" to be a reputable brand name in the fashion industry. As a fashion enthusiast, Miss Dhia from time to time selects her favorites garments from her array of stock for her own use. She wears her own brand as part of promotion efforts. However she carefully records them as drawings. For the year ended 31 December 2017 her drawing account shows a balance of RM4,500.

The depreciation of the car and shop buildings is provided on yearly basis using straight line method at 20% and 5% per annum respectively. The same method is expected to be used in the near future. For the year ended 31 December 2017, RM12,000 has been spent for wages and salaries. Besides, RM50,000 was incurred for purchasing of garments to be sold, RM6,000 for utilities and RM8,500 for general expenses. Diraku Fashion recorded sales of RM85,000 for its first year and also received RM2,000 commission for the sales of cosmetic products. At the end of the year there was an outstanding balance of RM10,000 owed to her suppliers.

Required -

a. Explain the following characteristics of Diraku Fashion business organization:

i. Capital contribution

ii. Liabilities

iii. Profit and Loss

b. Discuss the following accounting concepts:

i. Going concern concept

ii. Business entity concept

iii. Consistency concept

c. Find the total expenses of Diraku Fashion.

d. Illustrate the journal entries for depreciation and interest on loan of Diraku Fashion.

Reference no: EM132737220

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