Question

ambrose traders is a general trading store . Ambrose traders tracks the inventory according to the periodic inventory system and is a vat vendor . all amounts include vat of 15% , where applicable , unless otherwise stated . Ambrose traders entered into the following transactions ;

transactions for the months

1. purchased merchandised on credit,rs .24700( excluding vat)

2.paid short term insurance premium by debit order Rs 4200( vat inclusive)

3 returned merchandise to the seller and recieved a credit note, Rs 3200 excluding vat( refer to transaction 1 above)

4. purchsed a kettle and a toaster on credit Rs. 2200. the kettle and toaster will be used only by staff

5. the owner withdrew inventory for his own use cost price Rs 2520 including vat

6. paid for delivery cost via Abc couriers for trading inventory from petty cash Rs 152 vat inclusive

7. purchased an office computer with cash from Abc inc. ltd Rs 16500 vat inclusive

8 recieved interest from the bank on a favourable bank balance Rs 87.65

REQUIREd : analyse each of the transactions above and complete the table using periodic inventory system

Show the double entry , debit and credit and general ledger account names as well as the effect on the accounting equations fro each transaction in the table columns ensure that u use the positive and negative signs

3.

Answer 1

For recording the transactions journal entries are made.

The journal entries for the above transactions are:

Transaction Particular Debit Credit
1 Inventory account (Dr.) 24,700
VAT input account (Dr.) 3,705
Accounts Payable (Cr.) 28,405
(Being purchases recorded with 15% VAT)
2 Insurance premium expense (Dr.) 4,200
Bank account (Cr.) 4,200
(Being insurance expense recorded)
3 Accounts Payable account (Dr.) 3,680
Returns outward (Cr.) 3,200
VAT outward (Cr.) 480
(Being merchandise returned to supplier)
4 Equipment-Toaster and kettle (Dr.) 2,200
Accounts Payable (Cr.) 2,200
(Being equipment purchased on credit)
5 Drawings (Dr.) 2520
Inventory accounts (Cr.) 2191
VAT output (Cr.) 329
(Being drawing recorded with 15 % VAT)
x + 15%x = 2520

115x = 2520 * 100

x= 2191