Tutorial 2

a)          The owner invested additional cash to the business.

• cash +

  capital -

• cash +

  capital +

b)         The bank has granted a loan to the business and the proceeds has been deposited into the business’s bank account.

• loan +

  bank +

• loan -

  bank -

c)          Received rent in cash.

• rent expense +

  cash +

• rent revenue+

  cash +

d)         The company purchased a new building, of which 10% deposit was paid through cheque and the remainder will be paid through mortgage loan.

• building +

  cheque +

  mortgage loan +

• building +

  bank +

  mortgage loan +

• building +

  cheque -

  mortgage loan +

• building +

  bank -

  mortgage loan +

Answer explanation

cheque = must be recorded as BANK

e)          The owner withdrew some cash from the business for personal use.

• drawing - (OE+)

  cash -

• drawing + (OE-)

  cash -

f)          The company received a cheque from customer as part of the payment on the outstanding amount(amount owed).

• bank -

  customer -

• bank +

  customer -

• bank +

  account receivable -

• bank +

  account receivable +

Answer explanation

account receivable

= $$ owed by customers to the company

it's called receivable because the money is to be received back by the company eventually

g)         Paid electricity by cheque.

• electricity expense - (OE+)

  bank -

• electricity expense + (OE-)

  bank -

h)         The business purchased  raw materials from its suppliers on credit.

• purchases -

  cash -

• purchases +

  cash -

• purchases +

  account payable +

• purchase +

  account payable -

Answer explanation

1. purchase raw material/goods = must be recorded as purchases

raw materials and goods are for customers, not for company's own use

2.on credit/on account means pay later

3.account payable= amount that company owes to suppliers

it's called payable because the amount is to be paid later by the company

i)           A cheque has been drawn out to pay for the owner’s household expenses.

• household expense +

  bank -

• drawing +

  bank -

Answer explanation

house, household, family, personal, private= drawing

j)           Company paid the first installment to the supplier.

• cash/bank +

  supplier -

• cash/ bank -

  account payable -

Answer explanation

paid back to supplier,

therefore:

cash reduce

amount owed to supplier (acc payable) reduce