ACCT Equation & Double Entry

Short questions

1.

Calculate the missing figures in the following table: (6 marks)

Assets Liabilities Capital

$ $ $

(a) Firm A ? $228,507 $158,398

(b) Firm B $339,208 ? $230,567

(c) Firm C $1,963,820 $796,814 ?

(d) Firm D ? $850,930 $239,753

(e) Firm E $4,104,506 $1,098,555 ?

(f) Firm F $2,183,780 ? $774,009

2.

Compute the missing amount in the accounting equation for each business: (6 marks)

Assets Liabilities Capital

$ $ $

(a) Business A 298,000 448,000

(b) Business B 103,000 29,000

(c) Business C 149,500 96,000

(d) Business D 279,600 87,200

(e) Business E 1,230,000 243,000

(f) Business F 220,600 66,500

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3.

Indicate which of the following are a firm’s assets and which are liabilities. (5 marks)

(a) Deposits paid to suppliers

(b) Deposits received from customers

(c) Loan from the owner of the firm

(d) Amount owed on a mortgage

(e) Loan to an employee

4.

Classify the following items into assets or liabilities: (5 marks)

(a) Cash contributed by the owner

(b) Bank loans

(c) Office equipment

(d) Joyce Chan, a debtor

(e) Mary Lee, a creditor

5.

For each of the following independent situations, state the figure required:

(a) Assets: $300,000; liabilities: $100,000

State the amount of capital. (1 mark)

(b) Net assets: $500,000; liabilities $200,000

State the amount of capital. (1 mark)

(c) Net assets: $650,000; liabilities $800,000

State the amount of assets. (1 mark)

(d) Capital: $300,000; liabilities $220,000

State the amount of assets. (1 mark)

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(e) Assets: $700,000; Capital $470,000

State the amount of liabilities. (1 mark)

6.

For each of the transactions below, state how it affects the assets, capital or liabilities of a firm

(e.g., Assets: Cash ↑ $1,000).

(a) Issued a cheque of $100,000 to a creditor to repay a trade debt.

(b) Bought office equipment for $8,000 on credit.

(c) Trade debtors settled trade debts of $60,000 in cash. The firm then deposited this amount into

the firm’s bank account.

(d) S Yau, the owner, drew a personal cheque for $105,000 and deposited it into the business

bank account.

(e) Paid rent of $8,000 in cash. (5 marks)

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7.

Show how each of the following transactions affects the totals of the accounting equation.

(a) K Ho, the owner, took a computer costing $2,000 from the business for private use.

(b) Received cash of $12,000 from a trade debtor.

(c) Received bank interest of $450.

(d) Borrowed $9,600 from C Yeung and purchased office equipment of $2,000 by cheque.

(e) Disposed of motor vehicles at cost and received cash of $10,000. (5 marks)

8.

K Lee’s business commenced on 1 July 2018. During the first month, the following business

transactions were made:

Jul 1 K Lee contributed office equipment worth $36,000 and $50,000 in cash to the business.

On the same date, half of the cash was deposited into the business bank account.

" 5 Bought office equipment for $25,000 from Chan’s Co on credit. Payment to be made

within one month.

" 10 Bought goods for $5,000 from Lam’s Co by cheque.

Required:

Calculate the following figures for K Lee’s business:

(a) The amount of capital as at 5 July 2018 (1 mark)

(b) The amount of assets as at 1 July 2018 (1 mark)

(c) The amount of liabilities as at 10 July 2018 (1 mark)

9.

Leo Hung’s business had the following transactions during May 2019:
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May 1 Paid a creditor $950 by cheque.

" 5 Bought computers for $20,000 on credit from Fast Computer Co for business use.

" 10 Leo took a computer costing $4,000 for his personal use.

" 13 The business took out a bank loan of $40,000.

" 18 Leo withdrew $5,000 from the business bank account and put it in the cash box of the

business.

Required:

State the effect of the above transactions on assets, capital and liabilities. (5 marks)

10.

State the two missing steps of recording transactions in double-entry accounts.

(2 marks)

Step 1: Identify the accounts that are affected by the transaction.

Step 2: ?

Step 3: ?

Step 4: Enter the date, details and the amount of the transaction in

each of the accounts.

11.

Molly Tang is a sole trader engaged in the trading of watches. She sold watches for $34,000 on

credit to D Chau on 2 May 2019. D Chau settled half of the amount by cash on 16 May. On 28 May,
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Molly bought office equipment for $2,600 in cash and banked $14,000.

Required:

Prepare the accounts to record the above transactions. (5 marks)

12.

Jenny Kwan’s business had the following transactions during the month ended

31 October 2017:

Oct 1 Jenny contributed a motor vehicle worth $50,000 for business use.

" 3 Jenny paid a $500 electric bill for her private apartment with a cheque

drawn on the business bank account.

" 5 Purchased a $50,000 motor vehicle on credit from Nancy Motor Co for

resale purposes.

" 8 Jenny paid a $4,300 electricity bill for the business with her own money.

" 2 Settled the Nancy Motor Co’s account by cheque.

Required:

Prepare the accounts to record the above transactions. (5 marks)

13.

Tracy Kwan operates a trading business. As at 1 December 2017, the accounting records showed

the following information:

Cash 75,932
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Bank 159,863

Trade payables 254,063

Trade receivables 180,774

Other payables 36,800

Furniture and equipment 178,964

Loan from W Chiu 280,900

Inventory 369,603

Deposits received from customers 12,930

Required:

(a) Calculate the amount of capital as at 1 December 2017. (4 marks)

(b) Calculate the amounts owed by the business as at 1 December 2017. (2 marks)

(c) Calculate the amount of resources owned by the business as at 1 December 2017. (2 marks)

14.

Tom Lo’s business has the following assets and liabilities as at 31 May 2018:

Bank loan 160,000

Machinery 89,000

Trade receivables 147,000

Cash at bank 37,000

Motor vehicles 180,000

Inventories 71,000

Premises 382,000

Trade payables 91,000

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During June 2018, Tom brought in two motor vehicles totalling $67,000 and took inventory costing

$28,000 for personal use.

Required:

(a) Calculate the amount of net assets as at 31 May 2018. (4 marks)

(b) Calculate the amount of capital as at 30 June 2018. (2 marks)

Application problems

1.

Eliza Lam operates a trading business. For the following transactions of her business, state which

accounts are to be debited or credited. (4 marks)

Account to Account to
Transaction
be debited be credited

(a) Eliza settled the amount owed to Wah

Kee Co, a trade creditor of the business,

with her own money.

(b) Eliza took some money from the cash

register of her business to pay electricity

fees for her business.

(c) Eliza took some money from the cash

register of her business to pay water fees

for her own apartment.

(d) Eliza took some goods from the business

for personal use.

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2.

(A) Daniel Ng operates a trading business. For the following business transactions, state the

accounts to be debited and credited. (4 marks)

Account to Account to
Transaction
be debited be credited

(1) Daniel withdrew money from the

business bank account to purchase

office equipment for office use.

(2) The business took out a loan from

ABC Bank.

(3) Daniel took some office furniture

items from the business for personal

use.

(4) The business purchased office

equipment on credit from Linda

Equipment Co for resale purposes.

(B) Suppose in transaction (1) of part (A), the office equipment was purchased for resale purposes

instead of office use, would the double entry be different? If so, state the revised double entry.

(2 marks)

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3.

Complete the following table, showing the double entries required in the books of a business.

(7 marks)

Transaction Double entries required

(1) Bought $5,000 office equipment and

$20,000 furniture in cash.

(2) Sold goods for $35,000 on credit to P Kim.

(3) The proprietor took $2,000 goods from

the business for private consumption.

(4) Bought two motor vehicles of $30,000

each on credit from Supreme Vehicles.

(5) Sold goods for $6,200 to L Pau, of which

$2,800 was received in cash and the

balance was due in the following month.

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4.

G Leung’s business had the following transactions in December 2020:

Dec 2 Withdrew $5,000 from the bank and kept the money at the office.

" 4 Received a cheque of $48,800 from N Ko, a debtor.

" 10 Bought computer equipment costing $32,900 on credit from Precision Computers.

" 16 Sold surplus furniture to D Lau at its original cost of $7,800 for cash.

" 22 Settled the amount due to J Fan, a creditor, of $4,800 in cash.

" 24 G Leung contributed a motor vehicle worth $200,000 to the business.

" 30 Repaid a bank loan of $50,000 by cheque.

Required:

Record the above transactions in the following format: (6 marks)

Date Entries Effect on

2020 Assets Liabilities Capital

Dec 2 Dr Cash $5,000 +

Cr Bank $5,000 −

" 4

" 10

" 16

" 22

" 24

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 " 30

5.

Complete the following table, showing what accounts are to be debited and what accounts are to

be credited. (6 marks)

Account to Account to
Transaction
be debited be credited

(i) The proprietor paid Edith Kwan, a creditor of

the business, with his own money.

(ii) A debtor, Kerry Chau, paid the business in

cash.

(iii)
Paid a creditor, King Kong, by cheque.

(iv) Bought two computers on credit from

Tammy Yiu.

(v)
Bought a motor vehicle in cash.

(vi) Returned one computer used for business

purposes to Tammy Yiu.

6.

Larry Lam operates a trading business. During the first week of December 2017, his business had

the following transactions:

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 Dec 1 Bought $100,000 worth of computers on credit from Jason Ltd for resale

purposes.

" 3 Bought $100,000 worth of computers on credit from Jason Ltd for office

use.

He recorded the transactions in the books of his business as follows:

2017

Dec 1 Dr Computers $100,000; Cr Jason Ltd $100,000

" 3 Dr Computers $100,000; Cr Jason Ltd $100,000

As he only had limited knowledge of accounting, he asked you to review his accounting records.

Required:

(a) Did Larry Lam record the two transactions correctly? (2 marks)

(b) If both transactions were correctly recorded, briefly explain why the transactions should be

recorded in this manner. If one or more of the transactions was not properly recorded, briefly

explain to Larry Lam why you think the transaction(s) was/were not recorded properly, and

then state the correct double entry to be made. (3 marks)

7.

On 1 October 2018, Patrick Lee started a trading business. The business had the following

transactions for the month ended 31 October 2018:

(a) Patrick contributed cash of $50,000 and furniture of $30,000 to the business.

(b) Purchased furniture for $25,000 in cash from Quality Furniture Co.

(c) Purchased additional furniture for $10,000 on credit from Quality Furniture Co.

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 (d) Settled the amount of $10,000 owed to Quality Furniture Co in cash.

Required:

For each of the above business transactions, state the account to be debited and the account to be

credited in the books of the business. (5 marks)

8.

Johnny Wong started a trading business and made the following transactions in March 2020:

(a) Johnny contributed office equipment worth $200,000 to the business.

(b) Bought office equipment for $20,000 from Yin Kee Co. A cash sum of

$10,000 was paid immediately.

(c) The amount of cash in hand of the business was deposited into the

bank account.

(d) Settled the amount owed to Yin Kee Co by cheque.

Required:

For each of the above business transactions, state the account to be debited and the account to be

credited in the books of the business. (5 marks)

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9.

Amy Kwan is a sole trader. State the double entry required for each of the following transactions.

(5 marks)

(a) Sold goods for $10,000 on credit to Nina Co.

(b) Nina Co, a trade debtor, returned goods of $1,000.

(c) Amy paid a water bill of $500 for the business with her own money.

(d) Amy paid rates of $3,500 for her apartment with a cheque drawn on the business bank

account.

(e) Purchased office equipment for $50,000 by cheque from Silver Co, a retailer, for office use.

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