Running Balance

Question 1

How do you deal with a purchase of raw materials where 90% are used in the process?

Answer 1

1. Dr raw materials (100%)
   Cr bank (100%)

2. Dr WIP (90%)
   Cr Raw materials (90%)

Question 2

How do you deal with a transaction when only some of the COMPLETED stock are sold?

Answer 2

1. Dr finished goods (cost to make ALL)
   Cr WIP (cost to make ALL)

2. Dr Cost of sales (cost of products sold)
   Cr finished goods (cost of products sold)

Question 3

How do you deal with an invoice for an expenses where 80% relates to production process?

Answer 3

1. Dr Expense (20%)
    Cr bank (20%)

2. Dr WIP (80%)
    Cr bank (80%)

Question 4

How do we deal with a transaction where assets are sold and new asset is purchased, where all assets purchased to last 10 years straight line depreciation?

Answer 4

1. Dr NCA Disposal A/C(old asset)
   Cr Asset (old asset cost)

2. Dr bank (cost old asset sold for)
   Cr NCA disposal A/C (cost old asset sold for)

3. Dr Asset (new asset cost)
    Cr Bank (new asset cost)

4. Dr Depreciation Charge (costs of assets/10)
   Cr Asset accumulates depreciation (cost of assets/10)

Question 5

How do you deal with share premium? 2 people purchase 200 £2 ordinary shares and each pay £10,000

Answer 5

Computations:   £
Share Capital (2x200x£2)
Cash Received (10,000x2)
Share Premium (Cr-SC)

1. Dr Bank
   Cr Share Capital
2. Dr Bank
   Cr Share Premium

Question 6

How do you deal with loan repayment transactions?

Answer 6

1. Dr Loan
   Cr Bank
2. Dr Interest Expense
   Cr Bank

Question 7

How do you deal with capital introduction (by partners) transactions?

Answer 7

Dr Bank

Cr Capital Account