The Accounting Cycle : Double entry system : Practice Questions

When a business sells trading goods on credit to a customer, what are the correct double entries?

On 10 May, a business sold goods on credit to Mr. Wong for $$HKD1,500$$. On 15 May, Mr. Wong returned goods worth $$HKD300$$ to the business. On 20 May, the business received the remaining balance from Mr. Wong in cash. What is the amount received from Mr. Wong, and what is the double-entry to record this cash receipt on 20 May?

A company received a cash payment of $$HKD5,880$$ from a customer, Mr. Chan, in full settlement of an invoice totaling $$HKD6,000$$. The company offered a 2% cash discount for early payment. Which of the following journal entries correctly records this transaction?

A business receives cash from a customer for goods sold on credit previously. What are the correct double entries?

The owner of a clothing boutique withdrew clothes with a cost of $$HKD1,000$$ for personal use. The selling price of these clothes would have been $$HKD1,800$$. How should this transaction be recorded in the business's books?

On 1 March 2024, a furniture company purchased a new woodworking machine for $$HK\$80,000$$. They paid $$HK\$20,000$$ immediately by cheque and obtained a bank loan for the remaining balance. Additionally, installation costs amounting to $$HK\$5,000$$ were paid in cash on the same day. Describe the combined double-entry effects of these transactions on the accounting equation ($$Assets = Liabilities + Owner's Equity$$) and list the accounts to be debited and credited with their respective amounts.

An investor injected a machine valued at $$HKD50,000$$ and $$HKD20,000$$ cash into a new business as initial capital. How should this combined transaction be recorded?

A company paid $$HKD2,500$$ for advertising expenses by cheque. What is the effect of this transaction on the accounting equation ($$Assets = Liabilities + Owner's Equity$$)?

Smart Solutions Co. provides IT consulting services. The company's trial balance as at 31 December 2023 showed the following balances:

During January 2024, the following transactions occurred:

(i) January 5: Received $$HK\$20,000$$ from customers on account.

(ii) January 10: Paid $$HK\$10,000$$ to suppliers on account.

(iii) January 15: Provided consulting services for $$HK\$40,000$$, received cash $$HK\$25,000$$ and the rest on credit.

(iv) January 20: Purchased additional office equipment on credit for $$HK\$25,000$$.

(v) January 25: Paid January's rent of $$HK\$2,000$$ in cash.

Required:

(a) Open the necessary ledger T-accounts for all accounts listed in the trial balance and enter their opening balances as at 1 January 2024.

(b) Post the transactions (i) to (v) for January 2024 to the respective ledger accounts.

(c) Prepare an updated Trial Balance for Smart Solutions Co. as at 31 January 2024.

Skyline Services Co. commenced business on 1 April 2024. The following transactions took place during its first month of operation:

(i) April 1: Owner introduced $$HK\$150,000$$ cash into the business and contributed a vehicle valued at $$HK\$80,000$$.

(ii) April 3: Purchased office supplies on credit from Stationer Ltd. for $$HK\$6,000$$.

(iii) April 8: Rendered services to Customer A for $$HK\$25,000$$ on credit.

(iv) April 15: Paid salaries to employees for $$HK\$12,000$$ by cheque.

(v) April 20: Received $$HK\$18,000$$ cash from Customer A as partial payment for services rendered.

(vi) April 25: Paid Stationer Ltd. $$HK\$4,000$$ by cheque in partial settlement of the amount due.

(vii) April 30: The owner withdrew $$HK\$5,000$$ cash for personal use.

Required:

(a) Prepare the journal entries for the above transactions (i) to (vii), including narrations.

(b) Post the transactions to the following ledger T-accounts: Cash Account, Capital Account, and Accounts Receivable Account. Balance off these accounts as at 30 April 2024.