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    Week 3 Assignment

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    Wilson Chipeta
    Howard Mtunda submitted their Week 3 assignment for the course Accounting 1. The assignment contained exercises on [1] defining accruals and prepayments, [2] calculating depreciation using the straight-line and reducing balance methods, [3] writing off and estimating bad debts, and [4] classifying various costs and purchases as either capital or revenue expenditures. Mtunda provided detailed responses and calculations for each part of the multi-exercise assignment.

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    Week 3 Assignment

    Uploaded by

    Wilson Chipeta
    68 views7 pages
    Howard Mtunda submitted their Week 3 assignment for the course Accounting 1. The assignment contained exercises on [1] defining accruals and prepayments, [2] calculating depreciation using the straight-line and reducing balance methods, [3] writing off and estimating bad debts, and [4] classifying various costs and purchases as either capital or revenue expenditures. Mtunda provided detailed responses and calculations for each part of the multi-exercise assignment.

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    Week 3 assignment

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    Howard Mtunda submitted their Week 3 assignment for the course Accounting 1. The assignment contained exercises on [1] defining accruals and prepayments, [2] calculating depreciation using the straight-line and reducing balance methods, [3] writing off and estimating bad debts, and [4] classifying various costs and purchases as either capital or revenue expenditures. Mtunda provided detailed responses and calculations for each part of the multi-exercise assignment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    68 views7 pages

    Week 3 Assignment

    Uploaded by

    Wilson Chipeta
    Howard Mtunda submitted their Week 3 assignment for the course Accounting 1. The assignment contained exercises on [1] defining accruals and prepayments, [2] calculating depreciation using the straight-line and reducing balance methods, [3] writing off and estimating bad debts, and [4] classifying various costs and purchases as either capital or revenue expenditures. Mtunda provided detailed responses and calculations for each part of the multi-exercise assignment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 7

    Week 3 assignment

    Submitted by Howard Mtunda

    R1810D6517767

    Accounting 1

    UU-ACG-1000-15254

    Submitted to Andreas Soteriades

    Exercise 1

    a. Accruals are revenues earned or expenses incurred which affects a company's net income
    on the income statement, even though cash related to the transaction is not yet been paid.
    For example, an account receivable. A company receives a mobile phone bill in January
    for a past period this would be recorded as an expense accrual. When the company has
    provided services or goods but the payment is not yet been received it is called accrual
    revenue. Accruals are recognized the time the services or good have been provided but
    not yet paid.

    b. Prepayment is a payment that you make before you receive goods or services. This
    method allows a company to pay for goods and services, which can be used later. An
    example of a prepaid expense is insurance which a company frequently pay in advance
    for any future periods.

    c.
    Dr Electricity acc Cr Dr Water acc
    Cr

    $ $ $
    Cash 6500 cash 1700
    Cash 500 Bal C/d 7000 cash 300 Bal C/d 2000
    7000 7000 2000 2000

    Dr Audit fees Cr Dr salaries acc Cr


    $ $ $ $
    Cash 5000 Bal C/d 5000 cash 180,000
    5000 5000 cash 1500 Bal C/d 181,500
    181,500 181,500

    Dr Cash acc Cr
    $ $
    Electricity 7000 profit and loss extract
    Bal C/d 195,000 water 2000 Masha and the Bear Inc
    Audit 5000
    Salaries 181,500 less: expenses $ $
    195,500 195,500 water 2000
    electricity 7000
    Audit 5000
    Salaries 181,500 (195,500)

    Balance sheet extract


    Masha and the Bear Inc

    CURRENT LIABILITIES $
    Creditors 195,500

    Exercise 2
    a. Straight line method

    Cost-residual value
    Useful life

    $310,000- $120,000
    1 year

    = $190,000
    b. The reducing balancing method
    All assets =$ 310,000 + $ 79,200
    =$ 389,200

    Cost 389,200
    Depreciation of the year (25%) 97,300
    Balance at the end of the year 292,200

    Exercise 3

    a. When money owed to you becomes a bad debt, you need to write it off. Writing it off
    means adjusting your books to represent the real amounts of your current accounts. To
    write off bad debt, you need to remove it from the amount in your accounts receivable.
    Business balance sheet is be affected by bad debt. Bad debts can be written of using
    direct write off method or provision method. Allowance on bad debts is a contra-asset
    account that nets against the total receivables presented on the balance sheet to reflect only the
    amounts expected to be paid. The allowance for doubtful accounts is only an estimate of the
    amount of accounts receivable, which are expected to not be collectible. It reduces the receivable
    account.
    b.

    Bad debts

    Date Particulars Dr Cr
    2017 $ $
    accounts receivable written off 740,000 740,000

    c.

    Dr Accounts receivable Cr Dr doughtful debts Cr


    2017 $ 2017 $
    Receivable 24,000 receivables 24,000

    D.
    Dr Adjusting Entry Cr
    2017 $ 31/12/2017 $
    Allowance 70,000 Bal C/d 80,000
    Added 10,000
    80000 80,000

    Exercise 4
    A. Purchase of a motor car
    -Capital expenditure
    A company can use a motor car for a long period
    B. Claim for a meal
    -revenue
    It is a small expense and can be used for a short period

    C. Purchase of shares in a supplier


    -revenue
    The money that will be used to purchase the shares will increase the revenue of a company
    D. Purchase of a new computer
    -Capital expenditure
    A company will use it for a long period to increase productivity
    E. Payment for hotel accommodation
    -Revenue
    It is considered a revenue because the accommodation will be used for a short period

    F. Installation cost for server


    -Capital expenditure
    A cost will be included to the cost of the server

    G. Purchase of raw materials


    -Capital expenditure
    It helps the company to increase the production

    H. Repair of motor vehicles


    -Revenue
    It is a small cost, which a business have to pay on a short period

    I. Purchase of new stationery


    -Capital expenditure
    These are assets used by a company for a long period
    J. Payment of an insurance premium
    -revenue expenditure
    These are prepaid expenses which are paid by a company before they receive the services and they
    increases the revenues

    K. Wages
    -revenue expenditure
    These are payments, which employers pay employees for the work done.
    L. Purchase of a new plot of land.
    -Capital expenditure
    It is an asset, which the company will use for a long period.

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