Accounting Transactions for L Cronje's Business

Question 2 Cronje's Transactions Overview

Summary of Transactions

In this section, we will record and analyze a set of transactions conducted by L. Cronje's business, highlighting the effects on the accounting equation, which follows the principle: Assets = Liabilities + Equity.

1. Increase in Capital Contribution

  • Transaction: The owner, L Cronje, increased his capital contribution by depositing R25,000 cash into the bank account of the business.

  • Effect on Accounting Equation:

    • Debited: Bank Account (Asset) R25,000

    • Credited: Capital Contribution (Equity) R25,000

    • This transaction increases the assets and equity of the business.

2. Credit Sales to M Cathy

  • Transaction: Credit sales were made to M Cathy amounting to R2,400 with a cost price of R1,800.

  • Effect on Accounting Equation:

    • Debited: Debtors Control (Asset) R2,400

    • Credited: Sales Revenue (Equity) R2,400

    • Additionally, cost price affects the inventory:

      • Debited: Cost of Goods Sold (Expense) R1,800

      • Credited: Inventory (Asset) R1,800

3. Debtor Payment by Z Zeelie

  • Transaction: A debtor, Z Zeelie, paid his account by making an internet transfer of R500.

  • Effect on Accounting Equation:

    • Debited: Bank Account (Asset) R500

    • Credited: Debtors Control (Asset) R500

    • This reflects the increase in cash and the decrease in debtors.

4. Purchase Invoice from YU Suppliers

  • Transaction: Received an invoice for equipment purchased from YU Suppliers for R7,500.

  • Effect on Accounting Equation:

    • Debited: Equipment (Asset) R7,500

    • Credited: Accounts Payable (Liability) R7,500

    • This increases both the assets and liabilities.

5. Weekly Wages Paid

  • Transaction: Paid weekly wages amounting to R2,000.

  • Effect on Accounting Equation:

    • Debited: Wages Expense (Expense) R2,000

    • Credited: Bank Account (Asset) R2,000

    • This reflects a decrease in assets and an increase in expenses, which affects equity adversely.

6. Purchase of Trading Inventory

  • Transaction: Purchased trading inventory from Bargain Wholesalers and paid via EFT, R7,500, with a trade discount of 10%.

  • Net Amount Paid: R7,500 - (10% of R7,500) = R6,750

  • Effect on Accounting Equation:

    • Debited: Inventory (Asset) R7,500

    • Credited: Bank Account (Asset) R6,750

    • Credited: Accounts Payable (Liability) R750 (since only part of the invoice is paid).

7. Cash Sales of Merchandise

  • Transaction: Cash sales of merchandise resulted in R4,000 with a cost price of R2,800.

  • Effect on Accounting Equation:

    • Debited: Bank Account (Asset) R4,000

    • Credited: Sales Revenue (Equity) R4,000

    • Additionally:

    • Debited: Cost of Goods Sold (Expense) R2,800

    • Credited: Inventory (Asset) R2,800

8. Faulty Goods Return from M Cathy

  • Transaction: M Cathy returned faulty goods with a value of R500 and a cost price of R280.

  • Effect on Accounting Equation:

    • Debited: Sales Returns (Equity) R500

    • Credited: Debtors Control (Asset) R500

    • Additionally:

      • Debited: Inventory (Asset) R280

      • Credited: Cost of Goods Sold (Expense) R280

9. Payment to YU Suppliers

  • Transaction: Made an EFT transfer to YU Suppliers to pay R5,000 on account.

  • Effect on Accounting Equation:

    • Debited: Accounts Payable (Liability) R5,000

    • Credited: Bank Account (Asset) R5,000

    • This reduces liabilities and cash.

10. Rent Received

  • Transaction: Received rent from the tenant which amounted to R6,500.

  • Effect on Accounting Equation:

    • Debited: Bank Account (Asset) R6,500

    • Credited: Rent Income (Equity) R6,500

    • This increases both assets and equity.

11. Purchase of Stationery

  • Transaction: Bought pens, paper, and envelopes from PNAR, paying R500.

  • Effect on Accounting Equation:

    • Debited: Stationery Expenses (Expense) R500

    • Credited: Bank Account (Asset) R500

    • This decreases assets and increases expenses.

12. Invoice for Computer Equipment

  • Transaction: Received an invoice from BG GAMES for a computer (R6,000), printer (R3,500), and cartridge (R420) all bought on credit.

  • Total Amount: R6,000 + R3,500 + R420 = R9,920

  • Effect on Accounting Equation:

    • Debited: Equipment (Asset) R9,920

    • Credited: Accounts Payable (Liability) R9,920

    • This increases both assets and liabilities.

13. Return of Faulty Goods to YU Suppliers

  • Transaction: Returned faulty goods to YU Suppliers worth R750.

  • Effect on Accounting Equation:

    • Debited: Accounts Payable (Liability) R750

    • Credited: Inventory (Asset) R750

    • This decreases liabilities and increases assets.