Question

Nina and Nita are joint owners of Classic Carpets. The business started its operation in January 2019. The business sells various types of carpet and rugs to the general public. Among the types of carpets and rugs available in their business are cut pile carpet, cut and loop carpet, loop pile carpet and patterned loop carpet. They also provide carpet installation service at customer’s place and carpet cleaning service. The business transactions were done both under the credit and cash transactions between the suppliers and customers.

The business was started with RM50,000 cash from Nina and RM150,000 worth of business premise from Nita. They also took loan from bank amounting RM100,000. They assume the business will continue to operate for a foreseeable future. During the year ended 31 December 2019, the business has the following information:

Motor vehicles 40,000

Accounts payable 20,000

Inventory 30,000

Bank 74,000

Water and electricity 15,000

Interest on bank loan 2,000

Cash sales of RM200

Asset Revenue - Cash Sales

Required:

a) . i. Identify any two (2) revenues and any two (2) expenses related with the business and   Identify the business Asset, Liability, Owner’s Equity and their amount from the record above.

Answer 1

Revenues

1. Sales RM 200

2. Closing inventory 30,000

Expenses

1. Water and electricity 15,000

2. Interest on bank loan 2,000

Asset

1. Cash RM 150,000 (50,000 + 100,000)

2. Motor vehicles 40,000

3. Inventory 30,000

4. Bank 74,000

5. Business premises RM 150,000

Liability

1. Bank loan RM 100,000

2. Accounts payable 20,000

Owners's Equity

1. Nina's Capital RM 50,000

2. Nita's Capital RM 150,000

Owner's equity will also include the net profit or loss from the business