Secondary : Four

Topic : Accounting Equation & Balance Sheet

by : Miss Law Wai Chun

Unit 1: Case study of Ann’s financial position: Accounting equation

Table of Content

Unit 4: Balance Sheet of Some Companies & Use of Educational courseware

Unit 2: Case study of Doraemon’s Ice-Cream Shop: Change in accounting equation

Unit 3: Classwork

Ann

Ann has four items of belongings:

Watch $800

Computer $13,000

acer:acer:

Ann’s total assets ( 資產 ) =

Model $1,000

Savingaccount

Cash at bank $2,000

$16,800

Ann’s assets( 資產 ) $

Watch 800

Computer 13,000

Model 1,000

Cash at bank 2,000

16,800

====

Asset’s sources of finance

$10,000 Loan ( 貸款 )from Co.

$300 Borrowing from uncle$10,300 Liabilities( 負

債 )

How much actually owned by Ann ?

+

$6,500 Ann’s Capital ( 資本 )

Assets $ Capital & Liabilities $ Watch 800 Capital 6,500

Computer 13,000 Loan from Co. 10,000

Model 1,000 Borrowing from uncle 300

Bank 2,000 _______

16,800 16,800

===== ======

Ann’s Balance Sheet

What is accounting

equation, Snoopy ?

Hay…it isAssets = Liabilities + Capital

It is a right time to start my own ice-cream business!!

I open a saving account for the shop and deposit

$150,000 as investment ( 投資 )

Assets = Liabilities + Capital

Bank $150,000 = 0 + $150,000

What assets should I buy ?

Stock( 存貨 )

Electrical

appliances ( 電 器 )

Office

equipment ( 辦公儀器 )

Transaction:Purchase of electrical appliances amounting to $10,000 by cheque.

Bank 140,000 = 0 + $150,000

Electrical appliances $10,000

$150,000

Assets = Liabilities + Capital

Transaction:Purchase of stock at $12,000 by cheque.

Bank $128,000 = 0 + $150,000

Electrical appliances $10,000

Stock $12,000

$150,000

Assets = Liabilities + Capital

Transaction:Purchase of office equipment at $9,000 financed by a loan.

Bank $128,000 = Loan $9000 + 150,000

Electrical appliances $10,000

Stock $12,000 Office Equipment $9,000

$159,000

Assets = Liabilities + Capital

Transaction: Repaid ( 償還 ) $5,000 loan by cheque.

Bank $123,000 = Loan $4,000 + 150,000

Electrical appliances $10,000

Stock $12,000 Office Equipment $9,000

$154,000

Assets = Liabilities + Capital

Doraemon’s Ice-Cream Shop

Balance sheet as at 31 Dec 2000

Assets $ Capital & Liabilities $ Electrical appliances 10,000 Capital 150,000

Office equipment 9,000 Loan 4,000

Stock 12,000

Bank 123,000 _______

154,000 154,000

====== ======

The effect of transactions on accounting equation is cumulative. Each transaction affects at least two items in the accounting equation.

The accounting equation should be presented as a balance sheet.

Classwork

2.7X Complete the gaps in the following table: Assets Liabilities Capital $ $ $(a) 55,000 16,900 ?(b) ? 17,200 34,400(c) 36,100 ? 28,500(d) 119,500 15,400 ?(e) 88,000 ? 62,000(f) ? 49,000 110,000

Classwork

2.9X Which of the following are assets, and which are liabilities ?(a) Motor vehicles(b) Premises(c) Money owed for goods(d) Stock for goods(e) Debtors(f) Bank loan (g) Cash in hand(h) Loan from K. Lung(i) Machinery

Singapore airlines

Hong Kong Ferry (Holding) Co. Ltd.

Borrow Frank wood’s Principles of Accounts for Hong Kong Vol.1 (5th Ed.) CD-Rom in the library.

Read the OHT P.2-3 as revision of this chapter and read the P.4 about the double entry system as the preparation for the next chapter.

Choose one of the following companies and read the items in the corresponding balance sheet

Copyright © by Janice Law 2000