Provide a good illustration of how businesses should adhere to accounting principles and assumptions, as discussed on slide 16 of Chapter 1.  

Accounting by Geoffrey

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Assignment Question(s):                                                         (Marks15)

Q1. Provide a good illustration of how businesses should adhere to accounting principles and assumptions, as discussed on slide 16 of Chapter 1.       (5marks)

Use this example as a guide for your answer.

According to the cost accounting principle, if a firm purchases land for SR400,000 but an outside appraiser values it at SR600,000, the land should still be recorded in the books at SR400,000.

Q2. Provide an example of each title here and then record the journal entries. Following the first given answer.                             (5marks)

1-Providing consulting services receiving cash.

Given answer:

ABC company provides consulting services and receives 1,000 cash.

Journal entry:

Dr.Cash. 1,000

Cr.Consulting Revenue. 1,000

2-Investment by an owner.

3-Purchasing equipment for cash.

4-Purchasing supplies on credit.

5-Borrowing money from a bank.

6-Paying investors their shares of dividends.

Q3. On 31/12/2020, the following balances appeared in the trial balance of Al Ghanim Company                                                                                 (5marks)

Al Ghanim Co.

Partial Trial Balance

December 31
Prepaid insurance 1,500  
Supplies 1,000  
Unearned service revenue   1,500
Equipment 50,000  

 

Additional information:

  1. An insurance policy examination showed SR1,000 of expired insurance
  2. An inventory count showed SR200 of unused shop supplies still available
  3. Depreciation expense on shop equipment, SR10,000
  4. SR800 of the Unearned service account balance was earned by year-end.

 

Required :

  1. Make the necessary adjusting entries.
  2. Show the impact of these adjustments on the income statement and the balance sheet statement.