Budgeting

Assessment 1 Question 1 1. External user, as they are the lenders of money and have a financial interest of the enterprise in able to make decisions about the reporting of the company. They have to analyse the accounting information of the company to check if they are able to repay the amount borrowed before approving the loans. They have to ensure on whether or not the company meets the regulations that apply. 2. Balance sheet would be the best financial information for the banker as it composed the value of the company comprising of assets, liabilities and equity. Assets reflect things of value that a company owns and has in its possession prior to the business. Liabilities are things of value that a company owes to others which are due to be repaid in a year or more depending on the credit terms given. And equity are retained earnings and contributions of the owner and shareholders to the business. With all these taken into account, a banker can analyse the financial stability of a company. Question 1 Part 2. Monte Hall Gaming has already purchased the land in cash, therefore he already owned the land. In accounting practice, owning a land is part of your asset and it have future economic value that can be measured and expressed in dollars. It is classify as tangible asset with an anticipated useful life of more than a year. Liabilities is only recorded when a company is liable for a debt and they are responsible for paying the debt. Thus, purchasing the land in cash does not reflect any owing amount in the financial statement. Question 1 Part 3. Wilson Mowing | Trading, Profit & Loss Statement | For the period ended 31st December 2011 | | | | | | | | $ | Service Revenue | | | | | | 31,900 | Less: | Operating Expense | | | | | | | Salary | | | | | | (4500) | | Repairs | | | | | | (800) | | Supplies | | | | | | (1600) | | Gasoline | | | | | | (3800) | | Net Income | | | | | | 21,200 | | | | | | | | | | | | | | | | | Wilson Mowing | Balance as at 31st December 2011 | | | | | | | | | | | | | | | $ | $ | Fixed Asset | | | | | | | | Truck | | | | | | 8500 | | Equipment | | | | | | 6300 | | | | | | | | | | Total Non-Current Assets | | | | | | 14800 | | | | | | | | | Current Assets | | | | | | | | Accounts Receivable | | | | | 2500 | | Cash | | | | | | 6800 | | | | | | | |   | 9300 | Less: Current Liabilities | | | | | | | Accounts Payable | | | | | (3500) | | Salary Payable | | | | | (200) | | Net Current Assets | | | | | | 5600 | | | | | | | | | Less Long Term Liabilities | | | | | | | Notes Payable | | | | | | (8200) | Net Assets | | | | | | | 12200 | Financed By: | | | | | | | | Capital | | | | | | 21200 | | Withdrawal | | | | | | (12000) | | Increase in equity | | | | | | 9200 | Total Equity | | | | | | | 12200 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3.1 Total Assets = $14,800 + $9,300 + $5,600 = $24,100 3.2 Total Liabilities = $3,500 + $200 + $8,200 = $11,900 3.3 Equity = $12,200 Net Income = $21,200 Assesment 2 Question 1 Revenue is the total amount of money generated from the company from the sale of goods or services. It is before any costs or expenses are deducted. It is recorded upon delivering the service even so cash is not received at the time of delivery. Examples of revenue includes net sales, exchange of assets, interest and any other increase in equity. Expenses are cost of operating business. Anything events that results in money flowing out of the business are expenses. It is ordinary and necessary for carrying on a business. To gain profit, a business have to minimize expense s without cutting into revenues to sustain the business operations. Examples of expenses include payments to suppliers, rental, employee’s salary and depreciation. Question 2 J Equity A. Record of transactions. C Debit B. An asset F Expense C. Left side of an account. H Net Income D. Side of an account where increase is recorded. I Ledger E. Copying data from the journal to the ledger. E Posting F. Using up assets in the course of operating a business D Normal Balance G. Always a liability G Payable H. Revenues – Expenses A Journal I. Book of accounts B Receivable J. Assets – Liabilities Question 3 Date | Description | Debit | Credit |   | Cash | 21,800 |   |   | Wade, Capital |   | 21,800 |   | Owner Investment |   |   |   | Office Furniture | 5,300 |   | | Cash |   | 5,300 | | Bought office supplies |   |   |   | Rent Expense | 1,400 |   |   | Cash |   | 1,400 |   | Paid rent expense in cash |   |   |   | Supplies | 700 |   |   | Accounts Payable |   | 700 |   | Purchase supplies on account |   |   |   | Salary Expense | 1,600 |   |   | Cash |   | 1,600 |   | Paid salary expense in cash |   |   |   | Accounts Payable | 400 |   |   | Cash |   | 400 |   | Paid $400 to supplier for office supplies purchased earlier in the month |   |   |   | Accounts Receivable | 5,800 |   |   | Service Revenue |   | 5,800 |   | Perform service on account |   |   |   | Wade's Drawings | 6,800 |   |   | Cash |   | 6,800 |   | Owner's Withdrawal |   |   | Cash | Wade's Capital 16,500 | 21,800 | Office Furniture | 5,300 | |   | Rent Expense | 1,400 | |   | Salary Expense | 1,600 | |   | Accounts Payable | 400 | |   | Drawings | 6800 | |   | Bal c/d | | 6,300 | | 21,800 | | | 21,800 | Bal b/d | 6,300 | | | | | | | | | Wade's Capital | Bal c/d | 21,800 | Cash | | 21,800 | | 21,800 | | | 21,800 | |   | Bal b/d | | 21,800 | | | | | | Office Furniture | Cash | 5,300 | Bal c/d | | 5,300 | | 5,300 | | | 5,300 | Bal b/d | 5,300 | | | | |   | | | | | | | | | Service Revenue | Bal c/d | 5,800 | Accounts Receivable | 5,800 | | 5,800 | | | 5,800 | | | Bal b/d | | 5,800 | | | | | | | | | | | Rent Expense | Cash | 1,400 | Bal c/d | | 1,400 | | 1,400 | | | 1,400 | Bal b/d | 1,400 | | | | |   | | | | | | | | | Supplies | Accounts Payable | 700 | Bal c/d | | 700 | | 700 | | | 700 | Bal b/d | 700 | | | | |   | | | | | | | | | Accounts Payable | Cash | 400 | Supplies | | 700 | Bal c/d | 300 | | | | | 700 | | | 700 | |   | Bal b/d | | 300 | |   | | | | | | | | | Salary Expense | Cash | 1,600 | Bal c/d | | 1,600 | | 1,600 | | | 1,600 | Bal b/d | 1,600 | | | | |   | | | | | | | | | Accounts Receivable | Service Revenue | 5,800 | Bal c/d | | 5,800 | | 5,800 | | | 5,800 | Bal b/d | 5,800 | | | | |   | | | | | | | | | Drawings | Cash | 6,800 | Bal c/d | | 6,800 | | 6,800 | | | 6,800 | Bal b/d | 6,800 | | | | |   | | | | | | | | | Wade's Trial Balance as at 31st December 2011 | Description | Dr($) | Cr($) | Cash | 6,300 | | Capital | | 21,800 | Office Furniture | 5,300 | | Service Revenue | | 5,800 | Rent Expense | 1,400 | | Supplies | 700 | | Accounts Payable | | 300 | Salary Expense | 1,600 | | Accounts Receivable | 5,800 | | Drawings | 6,800 | | | 27,900 | 27,900 |