Question
Clarina started a business as a sole trader and deposited 15,000 into the bank account. The following transactions took place during the first week of
Clarina started a business as a sole trader and deposited 15,000 into the bank account. The following transactions took place during the first week of trading:
- Purchased a five-year licence for an accounting software and paid 2,200 in cash. As Clarina was unsure how to categorise the amount, she posted the credit entry correctly but posted the debit entry to the suspense account.
- Paid rent of 300 by cheque.
- Bought goods for resale and paid 3,500 by cheque.
- Sold goods on credit to a customer, Randy, for 1,500.
- Sold goods for 1,750 and the customer paid in cash.
- Bought goods for resale on credit from James for 1,300.
- Paid wages of 150 in cash.
- An amount of 1,000 was credited on the bank statement and automatically entered in the cash at bank account by the computerised accounting system, but it could not match the amount to a known transaction and a credit entry was made to the suspense account.
- Paid other expenses in cash at the amount of 100.
- Withdrew 750 to cover her personal expenses.
The following information is also relevant:
a) After a consultation with her mother, working as a bookkeeper in a big company, Clarina realized that the five-year licence for the accounting software should be recorded as a non-current asset.
b) Clarina subsequently discovered that the received amount of 1,000 was a part-payment from Randy.
Required:
Prepare and provide the journal entries to record the transactions, including the correcting entries for clearing the suspense account.
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