ACCY111 โ Lec Notes
FINANCIAL RATIOS AND LIQUIDITY RATIOS
Question 1
Kevin opened Webdesign Service on 1 April 2020. The following five (5)
transactions occurred during the first month of operations:
1.%Kevin, the owner, invested $50,000 cash into the business.
2.%Purchased a 1-year insurance policy for $8,000. The business received an
invoice and paid in cash.
3.%Acquired office equipment for $30,000, paid $5,000 in cash and signed a 1-
year short term loan for 25,000.
4.%Purchased office supplies on credit for $2,000.
5.%Revenue earned for the first part of the month included $6,000 in cash
and%$7,000 was earned through credit customers.
Required: In the box below prepare the general journal entries to
record the above transactions. Narrations are required.
Transaction ๎ Dr Cr
๎ ๎ $ $
๎1 Cash at bank 50 000 ๎
๎ ๎๎ Kevin, Capital ๎ 50 000
๎Cash contributed by owner. ๎ ๎
๎๎๎ ๎
2 Prepaid insurance 8 000 ๎
๎ ๎๎๎๎๎๎๎ Cash at bank ๎ 8 000
๎Purchased prepaid insurance for a 1-year period.
๎ ๎
3 Office Equipment 30 000 ๎
๎ ๎๎๎๎๎๎๎๎๎ Cash at bank ๎ 5 000
๎ ๎๎๎๎๎๎๎๎๎ Loan Payable ๎ ๎ 25 000
๎ ๎ ๎ ๎
4 Office Supplies๎ 2 000 ๎
๎ ๎๎๎ Accounts Payable ๎ 2 000
๎Purchased office supplies on credit.
๎ ๎
5 Accounts receivable 7 000 ๎
