My Assignment Help

Accrual Method of Accounting for Al Majida Company Assessment Answer

Q1 A

. Al Madina company is a toy manufacturing company. The company raises its additional capital of OMR 500,000 by issuing shares. The company’s total expenses are OMR 35,000 and earns a revenue of OMR 80,000. They sold merchandise of OMR 800 to a customer in December. The company's sales terms require the customer to pay the company in 30 days. The company's income statement reported the sale in December.

From the above scenario

  1. Identify and explain which accounting principles / concept where implemented. [0.5+ 1.5 Marks]
  2. Identify, which form of business is suitable for them and give any two advantages. [1+1Mark]
  3. Find out the profit of the company.[1 Mark] 1

Mr Majid started a business in United Arab Emirates (UAE).For the business he purchased a factory building for …… 100,000. Also, he purchased raw materials worth200,000 to start the

production. He recruited 10 employees for his company who are very loyal and honest. He also bought 10 personal computers for ……..3400, 15 office chairs and tables for ……1200 and other machinery for the business for8600.

  1. If he follows Money measurement concept of accounting, then how he will record the business transactions?[1Mark]
  2. What form of business Mr Majid had started?[0.5 Mark]
  3. Identify and list out the business transactions in the above paragraph and state at what amount they will be recorded in the books of accounts.
  4. Identify the internal or external users of financial information mentioned in the above paragraph.[1 Mark]



Show the effect of following transactions on accounting equation. [5 Marks] 2020

Jan. 1 Salman started his business with cash OMR 100,000.

Jan. 5 Purchased good for OMR 5,000 and paid OMR 3,000 cash but remaining on account. Jan. 10 Paid transportation on goods purchased OMR 1,000.

Jan. 18 Sold goods to Rashid on credit basis for OMR 8,000 costing OMR 4,000. Jan.30 Paid rent for the month OMR 4,000.


Mr. Abdullah started a laundry business with Capital of OMR 8,100 and the following items are given:

Accounts Receivable-Omar Store OMR 5,500; Store Furniture OMR 3,000 Unearned Laundry Income OMR 600; Supplies Expense OMR 250

Notes Payable OMR 2,400; Rent Received in AdvanceOMR600 Accounts Receivable-Sohar College OMR 2,000

Cash on Hand -OMR 10,050; Utilities Expense OMR 200 Accounts Payable-Fashion Wear Trading Company OMR 8,850 Salary Expense -OMR 1,000; Discount received -OMR 500; Laundry Income OMR 7,500

Arrange the above items as Assets, Liabilities, Revenue and Expenses.

Apply the items into an accounting equation and prove that accounting equation is always equal. [2.5 Marks]

Q3 Ms. Marwa started a flower shop during May 2018, Prove the accounting equation by balancing the following items.

Capital OMR 25,400; Accounts Payable OMR 2,600; Fixtures OMR 2,800; Car OMR 3,900; Stock of goods OMR 4,550; Accounts Receivable OMR 2,780; Cash at bank OMR 6,750; Cash in hand OMR 7,220.[4 Marks]

During the first week of May 2018, if the following transaction takes place how the accounting equations changes:

  1. She bought extra stock for goods OMR 500 on Credit.[3 Marks]
  2. She bought a computer by cash OMR 750.[3 Marks]

You are required to prove the accounting equation as on 7th May 2018 after completing the above transactions. [Use the following tables]

AssetsAmount in OMRCapital + LiabilitiesAmount in OMR


She bought extra stock for goods OMR 500 on Credit.

AssetsAmount in OMRCapital + LiabilitiesAmount in OMR


She bought a computer by cash OMR 750.

AssetsAmount in OMRCapital + LiabilitiesAmount in OMR


Q4 Journalize the following transactions in the books of a trader for the month of Feb. 2020. [10 Marks]


1 Feb - Started business with OMR 100,000 and from which paid into bank OMR 30,000.

5 Feb - Bought on credit furniture for OMR 5,000 and Machine for OMR 4,000.

8 Feb - Purchased goods for OMR 20,000 on credit.

10 Feb - Sold goods to Ahmed on cash for OMR 15,000.

15 Feb - Amount withdrawn from bank for personal use OMR 3,000.

18 Feb - Deposited into bank OMR 5,000.

20 Feb - Sold goods to Ali for OMR 10,000 and received OMR 7,000 in cash but remaining on account.

22 Feb - Paid OMR 1,000 for stationary.

25 Feb - Paid rent OMR 500.

28 Feb - Sold furniture on account for OMR 1,500.

Q5 Post the transactions given in Q4 to the proper ledger accounts.


Question 1


  1. The accounting principle implemented is the Accrual method of accounting. Accrual method of accounting records the revenues and expenses when they are incurred. The recording of the transaction is not dependent upon exchange of cash. In the given situation the sales was made in December for 800 OMR but the cash for the sales will be received after 30 days. However, using the accrual method of accounting the sales was recorded in the month of December even though the cash was received in next month.   
  2. The Private Ltd. company form is suitable for the business of Al Majida. The business form allows the business to raise funds from friends, family members. The private limited has limited paper formalities. The shareholders have limited liabilities towards the debts of the company.  Later if the company grows further and needs more funding it can change to public limited company.
  3. Profit of the company:

Revenue               80,000

Less: Expenses    35,000

Profit                     45,000


  1. The money measurement concept says that business should record in the books of accounts only those business transactions that can be measured in terms of money. Thus the accounting transactions focus only on quantitative information and ignores non quantitative information. For example the loyal and honest employees recruited is ignored in accounting transactions unless payment s made to them for salaries while it is very important for business success. Mr. Majid will record all  the business information which is presented in monetary terms.
  2. Mr. Majid had started with proprietorship business. He is the single owner of the business and has invested his own money in the business. He is the sole owner of the business and responsible for all the liabilities of the business.
  3. Business transactions and the amount are:

Purchase of factory building ……….100,000

Purchase of raw Material……………..200,000

Purchase of 10 personal computers ….3,400

Purchase of office chairs and tables ……..1,200

Purchase of machinery ………………….8,600

  1. The internal users of financial information are:
  2. Mr. Majid
  3. Employees of the company
  4. Investors in business(if any)

External users are:

  • Sellers to the company
  • Government authorities
  • Prospective customers
  • Banks/lenders


Effect of the transaction on accounting equation:                

 AssetsAmount (OMR)=Capital + liabilitiesAmount (OMR)
1-Jancash (+)100,000 Capital (+)100,000
5-JanGoods (+)5,000 payable (+)2,000
 Cash (-)3,000   
10-JanCash (-)1,000 Capital (-)1000
18-JanGoods (-)4,000 Capital (+)4,000
 Receivables (+)8,000   
30-JanCash(-)4,000 Capital  (-)4000


Accounts Receivables (Omar store)Unearned laundry IncomeDiscount recdSupplies expense
Store FurnitureNotes payableLaundry IncomeUtilities expense
Accounts Receivables (Sohar College)Rent Received in Advance Salary expense
Cash on HandAccounts payables (Fashion wear trading company)  

AssetsAmount=Liabilities+ CapitalAmount(+Revenues- Expenses)Amount
    capital 8100

Accounts Receivables (Omar store)5,500 Unearned laundry Income600  
Store Furniture3,000   Supplies expense-250
   Notes payable2400  
Accounts Receivables (Sohar College)2000 Rent recd in advance 600 
Cash on Hand10,050 Accounts payables (Fashion wear trading company) 8850 
     utilities Expense-200
     Salaries expense-1000
     Discount recd500
     Laundry Income7500
 20,550 6,550

Q3 You are required to prove the accounting equation as on 7th May 2018 after completing the above


AssetsAmount (OMR)=Capital + liabilitiesAmount (OMR)
Cash in Hand7,220 capital25,400
Fixtures2,800 Accounts payable2,600
Accounts Receivables2,780   
cash at bank6,750   
Total28,000 Total28,000

She bought extra stock for goods OMR 500 on Credit.

AssetsAmount (OMR)=Capital + liabilitiesAmount (OMR)
Cash in Hand7,220 capital25,400
Fixtures2,800 Accounts payable3,100
Accounts Receivables2,780   
cash at bank6,750   
Total28,500 Total28,500

She bought a computer by cash OMR 750.

AssetsAmount (OMR)=Capital + liabilitiesAmount (OMR)
Cash in Hand6,470 capital25,400
Fixtures2,800 Accounts payable3,100
Accounts Receivables2,780   
cash at bank6,750   
Total28,500 Total28,500

Q4 Journalize the following transactions in the books of a trader for the month of Feb. 2020:

Journal Entries 

DateAccountAmount Dr. (In OMR)Amount Cr. (In OMR)

1-FebCash on Hand a/c                      70,000 

Cash At Bank                      30,000 

   Capital A/c

(Started business with capital)

5-FebFurniture A/c                        5,000 

Machinery A/c                        4,000 

    Accounts payables A/c

(Purchased  furniture and Machine on credit)

8-FebPurchases A/c                      20,000 

    Accounts payables A/c

(Purchase of goods on credit)

10-FebCash at hand A/c                      15,000 

    Revenue A/c

(Sold goods in cash)

15-FebWithdrawal a/c                        3,000 

   Cash at bank A/c

(Sales for  cash)

18-FebCash at bank                        5,000 

   Cash at Hand A/c

(Sales to Ahmed)

20-FebAccounts Receivables                        3,000 

 Cash A/c                        7,000 

     Revenue A/c

(Sold goods to Ali , recd cash and remaining on account)
22-FebStationary expense                        1,000 

    Cash A/c

(Paid for Stationary)

25-FebRent Expense500

    Cash A/c

(Paid for Rent)

28-FebAccounts receivables1500


(Sold furniture on account)

Q5 Post the transactions given in Q4 to the proper ledger accounts: 

DateDescriptionAmount DR.DateDescriptionAmount Cr.
   1-FebCash at Hand A/c           70,000 
   1-FebCash at Bank A/c           30,000 

Cash  at Hand A/c
DateDescriptionAmount DR.DateDescriptionAmount Cr.
1-FebCapital A/c         70,000    
10-FebRevenue A/c         15,000 18-FebCash at Bank             5,000 
20-FebRevenue A/c           7,000 22-FebStationary             1,000 
   25-FebRent Expense                 500 
           92,000                6,500 

Cash  at Bank A/c
DateDescriptionAmount DR.DateDescriptionAmount Cr.
1-FebCapital A/c         30,000    
   15-FebWithdrawal             3,000 
18-FebCash At hand           5,000    
           35,000                3,000 
Furniture  A/c
DateDescriptionAmount DR.DateDescriptionAmount Cr.
5-FebAccounts Payable           5,000 28-FebAccounts Receivables             1,500 
             5,000                1,500 

Machinery   A/c
DateDescriptionAmount DR.DateDescriptionAmount Cr.
5-FebAccounts Payable           4,000    

With drwawl A/c
DateDescriptionAmount DR.DateDescriptionAmount Cr.
15-FebCash at Bank A/c           3,000    
             3,000                       -   

Accounts Receivables
DateDescriptionAmount DR.DateDescriptionAmount Cr.
25-FebRevenue A/c           3,000    
28-FebFurniture A/c           1,500    
             4,500                       -   

Accounts Paybales
DateDescriptionAmount DR.DateDescriptionAmount Cr.
   5-FebFurniture A/c             5,000 
   5-FebMachinery A/c             4,000 
   8-FebPurchases           20,000 

Purchases A/c
DateDescriptionAmount DR.DateDescriptionAmount Cr.
8-FebAccounts Payables           2,000    
           92,000     -    

Revenue A/c
DateDescriptionAmount DR.DateDescriptionAmount Cr.
   10-FebCash at Hand A/c           15,000 
   20-FebCash at Hand A/c             7,000 
   20-FebAccounts Receivables             3,000 
    -                 25,000 

Staionary Expense
DateDescriptionAmount DR.DateDescriptionAmount Cr.
22-FebCash at HandA/c           1,000    
             1,000                       -   

Rent Expense
DateDescriptionAmount DR.DateDescriptionAmount Cr.
25-FebCash at Hand A/c               500    
                 500                       -   

Customer Testimonials