Before you begin:For purposes of testing and exams it's important to make sure you not only answer questions and exercises correctly but also complete them at the right speed. Use a watch or clock to time yourself while attempting this exercise.
Difficulty Rating: Intermediate
Time limit: 20 minutes
Q: Mr Robert commenced business on 1st January, 2011 with a capital of $100,000 in cash. On the same date he opened the bank account in ADCB and deposited $20,000. During the month of January 2011 the following transactions took place:
Jan 1 Bought goods for cash 70,000
2 Sold goods to Steve Co. (Credit) 38,000
15 Sold goods for cash 9,000
21 Steve Co. paid by cheque 35,000
22 Stationery bill paid by cheque 2,000
22 Telephone bill by cash 500
31 Paid rent by cash 2,000
Paid salaries by cash 3,000
Withdrew cash personal use 5,000
Required: Record journal entries for the transactions and post them to ledgers.
Jan 1 Dr Cash on hand 80,000 Dr Bank 20,000 Cr Capital 100,000
Note that in most accounting questions you won't have to account for "Cash on hand" and "Bank" in separate accounts. In most questions I just combine these into "Bank." But in this question they specifically talk about opening the bank account with $20,000 of the $100,000, which indicates they kept cash on hand in addition to the bank account, which needs to be accounted for.
1 Dr Purchases/Inventory 70,000 Cr Cash on hand 70,000