ACCOUNTING EQUATION

Charlie owns a stationery shop, Haya Traders.

The entity uses the perpetual inventory system to manage its inventory. All inventory sold for

cash is sold at 45% markup on cost. Despite credit checks, credit sales have historically

resulted in delayed payments by customers. Owing to this higher cost of credit, Charlie decided

that all credit sales will carry a 50% markup on cost.

Haya Traders 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 R9 000 are purchased on credit.

Credit terms have been agreed to with all suppliers. Purchases up to the value of R9 000 are

paid immediately.

Assume that the bank has a favourable balance.

The following transactions took place during October 2020:

1. The owner, Charlie, deposited R110 000 as capital in the bank account of Haya Traders.

2. Purchased inventory from Gastonia, R36 000.

3. Sold goods on credit, R21 765.

4. Paid the rental for the premises per cheque, R16 400.

5. Received R100 000 from First Bank, being a loan repayable in monthly instalments over

the next 6 years.

6. Purchased consumables from Futon, R11 000.

7. Cash sales of goods, R10 005.

8. Received payment on his account from a debtor, R15 600.

9. Issued a cheque to Telfast for R3 260, being payment of Haya Trader's electricity account.

10. Settled account owed to Gastonia (refer to 2), R36 000.

11. Purchased a computer from CE-Link, R7 500.

Required:

Show the effect of the above transactions on the accounting equation below.

Example: Haya Traders pays the local newspaper for the sales advertisement placed in the local community brochure -R1 650

No.

General Ledger

Assets

Owner's equity

Liabilities

Account Dr

Account Cr

E.g.

Advertising

Bank

-1 650

-1650