Business Accounting I

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BBM205/05 Business Accounting I

STUDENT NAME                       : KHOR HUEY MIN

STUDENT ID                               : 041140525

IC NUMBER                                 : 930408-07-5550

NAME OF TUTOR                       : Woo Hing Siang

CLASS CODE                               : 4BA11

Question 1

a)

        In the beginning of debit balance in bank statement balance, the unrecorded deposits in transit have to add into the bank side in Bank Reconciliation. There are consisting of shortage figure with the balance in bank compare to the cash book balance. The received payment will be recorded by company because the deposit will not show by bank in the timing period until the cheque clear to the next business day.

b)

        In bank statement, the outstanding cheque will be deducted from the balance appear. Company will write immediately records all cheque in the cash account and the outstanding record of cheque are not necessary to be adjusted. The outstanding cheque will not reach to the bank and the bank statement.

c)         

        In the end of the month, it will be reconciling in the cash account. RM1800 will be addition in the debit column which is the correction of the additional amount. RM1800 will be added to the sum in account.

d)

        In the end of the month, overdraft interest will be debit by bank. When the bank statement is received and it will be recorded. The overdraft amount will be unknown amount before received the bank statement in the particulate month. Overdraft interest will be credit the amount with the particular state overdraft interest and it will be correct in each account.

e)         

        Dishonored cheque are deducted in bank reconciliation due to it does not been record in cash book. We do not know about it have appear until we received the bank statement.

Question 2

a)

        Liability can be defined as a legal debt of company or liability that emerge when the process of business operations. Liabilities will be settle overtime by the transfer of economic benefits which is included money, products or services.

        There are long term and short term liabilities. Long term liabilities are a non-current liability. A long term liability is an obligation which is due more than one year of the date of the balance sheet in accounting. The example of long term liabilities is capital leases, deferred revenues and bonds payable.

        Short term liabilities are defined as a current liability or debt which is arising from business operations. A short term liability is an obligation which is due within one year or within the operating cycle or the current year of business. The example of short term liabilities is vendor invoices, taxes payable and accounts payable.

b)

        Cash discount is a reduction in the amount of invoice that allowed by the goods seller to motivate buyer to make payment within a specified time. The seller will offer cash discount like sales discount and buyer will refers to same discount like purchase discount. Early payment discount can be defined as cash discount. The seller will offer cash discount to buyer due to some reasons. If the seller is short of cash, he will offer cash discount to receive payment from buyer. Seller offer a cash discount to buyer for immediate payment for the purpose to entirely avoided the effort of billing buyer. Common cash discount is 1/10, net 30 in sales invoice. If the sales invoice is RM1000 and buyer return RM100 net amount due to seller is RM900 if paid within 1 month. If the buyer pays RM891 within 10 days of the date of sales invoice, the buyer can be deduct RM9 (1% of RM900) of the amount. RM9 of cash discount will be record by the sellers as Sales Discounts and RM9 savings will be record by the buyers as Purchase Discounts.

        Trade discount is defined as a reduction to the products’ price by manufacturer when it sells products to reseller. The reseller will charge their customers by full retail price to earn profit on different between of the amount through manufacturer sell the product to it and the price at which it then sold the products to the final consumer. If the reseller wants to obtain market share or clear the inventory which is excess, he can selling the product at a discount and it does not necessarily to resell the products with retails price of suggestion. A wholesaler which having high volume may be entitled to the 30% trade discount and a wholesaler with medium volume is given 20% of trade discount. There is no trade discount for retail consumer and they have to pay the published price. There are only allowing for having just one each product of published price if using trade discount. When the trade discount is deducted, the sale and purchase will be record in the amount.