FINANCIAL ACCOUNTING.docx - Financial Accounting...

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Financial Accounting Institutional Affiliation Date
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FINANCIAL ACCOUNTING 2 FINANCIAL ACCOUNTING QUESTION 1 (a) Most businesses start only accepting cash transactions because they believe credit transactions are complicated and costly to handle. They avoid paying bills using credit cards something that limits their ability to transact businesses. Therefore, it is good to give our clients options of transaction choices to establish smooth running of the business (Weygandt, Kimmel, KIESO & Elias, 2010) . Cash transactions are transactions that are described ‘payment by...’ or collection of cheques or cash and are usually posted in the c ash book, petty cash book or the general journal. Credit transactions credit transactions occurs when neither words cash nor bank was mentioned when the transactions took place; Mostly done using credit cards. Posted in the purchases journal, sales return outwards journal, sales returns journal and general journal. The only difference between cash and credit transaction is the timing of the transaction. Cash transaction payment is done immediately while credit is settled at a later date. i. Receipt of goods worth OMR 125 from a supplier together with an invoice for that amount credit: an involve is a document issued by the seller to a buyer relating to the transactions such as products supplied, quantities and agreed prices with alternative period of making payment. Cash
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FINANCIAL ACCOUNTING 3 transaction requires a receipt. Again, the transaction reduces debit balance while increasing credit balance. ii. Payment of OMR 275 by Cheque for a purchase. Cash: a cheque is a written document instructing a bank to pay the business for the purchases made. The transaction increases debit balances in the bank account. iii. Receipt of a deposit of OMR 15 for goods. Cash: the most significant proof of payment is the receipt. Receipts indicate that deposit for goods sold has been received. This reduces credit balance in the sales account a corresponding increase in, debit balance. iv. Sending of an invoice for OMR 135 to the payer of the deposit for the remaining value of goods. Credit: after a cash receipt payment of OMR 15, an invoice of OMR 120 will be sent to the buyer specifying the period to pay the balance. This increases the credit balance sales account. v. Sale of goods for OMR 15, payment received by credit card. Credit: credit card holders enable users to pay the business for goods with a promise to pay the agreed amount at a later date plus the agreed charges. Credit card reduces cash balances. (b) Statement of financial position is the other name for the balance sheet and reports the ‘business assets and liabilities and the difference in their totals to show the final moment of the accounting
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FINANCIAL ACCOUNTING 4 period. The difference between assets and liabilities shows the stock holders equity following the accounting equation.
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