2.The purchase of asset and incurring liability a)b)A stock of goods for resale was acquired at a cost of RM10,000 on credit from a supplier BS Store. 3.The purchase of asset by cash The business purchase a computer set costing RM5,000 for cash (using the business cheque) 4.Payment of liability A business cheque for RM3,000 was sent to BS Store .
EBAB123 Interim Sem 2020/2021 Page | 5 Statement of Financial Position (or Balance Sheet) RM Assets Shop PremiseMotor VehicleComputer StockCash at bank TOTAL ASSETS Liability Loan Creditor TOTAL LIABILITYOwner's Equity- CapitalTOTAL LIABILITY & OE 2.5a. The Effect of Profit or Loss on Capital The accounting equation:A = L + OE; If the business makes profit: A = L + (OE + Profit) A = L + OE + (Revenue - Expenses) Example 2: Continuing from Example 1; *Ignore the effect on stock for the time being since periodic inventory system will be used. 5.Sale of an asset for cash payment Stock costing RM1,300 is sold to Mr. Lee for RM2,100 cash. Assets = Liabilities + Owner Equity
EBAB123 Interim Sem 2020/2021 Page | 6 6.Sale of an asset on credit Stock costing RM2,000 is sold on credit to Gemilang Store for RM3,200. 7.Pay expenses Qayyum pays RM100 cash for the shop's electricity bill. 8.Drawing by the owner a)Qayyum pays a holiday package for his family with a RM1,200 business cheque. b)Qayyum also has taken goods costing RM300 for his own personal use. Normally the goods can be sold for RM500.
EBAB123 Interim Sem 2020/2021 Page | 7 Statement of Financial position RM Assets Shop PremiseMotor VehicleComputer StockCash at bank TOTAL ASSETS Liability Loan Creditor TOTAL LIABILITY Owner's EquityCapital Profit/(loss) (-)Drawing TOTAL OE TOTAL LIABILITY & OE Note: Profit increases owner’s equity while loss reduces owner’s equity2.5b. Rules of debit and credit The use of double-entry bookkeeping will ensure a more systematic and efficient recording of transactions and determination of profit. The rules of double-entry involve the 5 types of transactions - assets, expenses, owner's equity, revenue and liabilities.They are shown on a T-shape ledger format with the debit place on the left-hand side and credit on the right-hand side.The rules:TYPE OF TRANSACTION DEBIT (Dr) CREDIT (Cr) Assets Increase Decrease Owner's equity Decrease Increase Liabilities Decrease Increase Revenue Decrease Increase Expenses Increase Decrease
EBAB123 Interim Sem 2020/2021 Page | 8 CLASS EXERCISE Question 1 Deala Sofia establishes an insurance agency on June 2019 and completed the following transactions during June:June 01 Opened a business bank account in the name of DS Agency with deposit RM50,000 as capital 02