Accounting 101

ACC101 ACCOUNTING Question 2 [36] ACCOUNTING EQUATION Gerald owns a shoe shop, Gingko Enterprises. The entity uses the perpetual inventory system to manage its inventory. All inventories sold for cash are sold at 42% markup on cost. Despite credit checks, credit sales have historically resulted in delayed payments by customers. Owing to this higher cost of credit, Gerald decided that all credit sales will carry a 50% markup on cost. Gingko Enterprises is not registered as a VAT vendor, as the annual turnover is not expected to exceed R1 000 000. The entity also decided not to voluntary register for VAT. All goods (trading stock as well as any other goods) exceeding R8 500 are purchased on credit. Credit terms have been agreed to by all suppliers. Purchases below the value of R8 500 are paid immediately. Assume that the bank has a favourable balance. The following transactions took place during January 2021: 1. Gerald increased his capital contribution from R50 000 to R150 000. 2. Bought machinery on credit from Machin for R81 235. 3. Issued a cheque of R250 to the municipality for a trade licence. 4. Bought a laptop from Matrix for R7 999. 5. Purchased stationery and cartridges from CNA for R2 180. 6. Bought merchandise from Vellie Wholesalers, R6 513. 7. Cash sales of goods, R18 176. B. Merchandise sold on credit to E Heinz, R5 250. 9. Paid the telephone account, R3 506. 10. Purchased delivery scooter from Vespa, R30 599. 11. Transferred R2 605 to Machin, being the first instalment on their account. 12. Paid salaries for the month, R7 500. Required: Analyse the transactions above for Gingko Enterprises for January 2021 in the accounting equation by using the table below. Example: Gingko Enterprises pays the local newspaper for the sales advertisement placed in the local community brochure - R1 650. ASSETS EQUITY LIABILITIES DR + CR - DR - CR + DR - CR + E.g 1 650 1 650