2020 SACSS 3N POA EOY P1 Q2

REQUIRED

a. Explain what ‘double entry’ means.

[1]

b. State the double entries for the following transactions.

[6]

Date	Transaction	Account to debit	Account to credit
2020
Jul 1	Took a ten year loan from DBS Bank $30 000.
11	Returned goods to credit supplier Bridget $530.
22	Owner Qian Wen brought her own van valued at $10 000 into the business.

c. Analyse the effects of the following transactions on the assets, liabilities and equity. State the account affected and the amount involved clearly with a ‘+’ sign for increase and a ‘-‘ sign for a decrease. Write ‘no effect’ for the accounting element(s) not affected by the transaction.

[6]

The first transaction has been completed as an example for you.

	Transaction	Effect on
		Assets	Liabilities	Equity
Eg	Bought goods on credit $10 000	Inventory + $10 000	Trade payables + $10 000	No Effect
(i)	Owner Qian took goods for her personal use $150.
(ii)	Paid supplier $2000 by cheque.
(iii)	Banked in cash $3000.

[TOTAL 13]

SOLUTION

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Double entry means that every transaction is recorded in two accounts – with one amount on the debit side of one account and the same amount on the credit side of another account.

	Transaction	Effect on
		Assets	Liabilities	Equity
Eg	Bought goods on credit $10 000	Inventory +$10 000	Trade payable + $10 000	No Effect
(i)	Owner Qian took goods for her personal use $150.	Inventory -$150 √	No Effect	Drawings -$150 √
(ii)	Paid supplier $2000 by cheque.	Cash at bank -$2000 √	Trade payables -$2000 √	No Effect
(ii)	Banked in cash $3000	Cash in hand -$3000 √ Cash at bank +$3000 √	No Effect	No Effect

2020 SACSS 3N POA EOY P1 Q2

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