ACCT1130: Classroom Discussion case: Recording of Transactions

Sam and Jay started with Cash 10,000 and Machinery 1,00,000. They decided to set up a production line for PPE kits for. the protection from Covid 19 virus. As their demand rose, they decided to buy one more piece of machinery. For the same, they took bank overdraft and purchased the machinery. The quality of the companys product was extremely high and therefore, it could develop a reputation for itself in the market and business was flourishing. After 1.5 years, their old machinery turned obsolete so they decided to sell the same. They sold it and got some cash proceeds. To further increase the brand presence among the concerned stakeholders, they decided to run advertisements from the cash proceeds of machinery sold. As more and more customers demanded their product, they decided to launch a discount for bulk purchases. The discount was not to be recorded in the books of accounts. This campaign was successful and they earned a lot of profits from the same.

Q1. Which type of discount is being discussed in the last part of the passage?

(a) Trade discount (Given on MRP)

(b) Cash discount (Given only if cash is paid within a specified period)

(c) Both (a) and (b)

(d) Cant be determine

Q2. Which asset is discussed in the line, The quality of the companys product was very high and therefore, it could develop a reputation for itself in the market and business was flourishing?

(a) Tangible

(b) Intangible

(c) Current.

(d) Both (a) and (c)

Q3. Which type of liability is discussed in the passage?

(a) Non-current

(b) Current

(c) Both (a) and (b)

(d) Cant be determined

Q4. What was the capital initially invested?

(a) 10,000

(b) 1,00,000

(c) 1,10,000

(d) Cant be determined

Q5. The passage involves capital receipts (Non-recurring apart from initial capital invested).

(a) True

(b) False