TMA: Financial Accounting Concepts and Practices

The TMA covers the financial accounting concepts and practices in the businesses; as you work, you will gain confidence in your ability to use the financial statements of real company. It is marked out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’ understanding of some of the learning points within chapters 1 to 4. This TMA requires you to apply the course concepts.

• Increase the students’ knowledge about the reality of the accounting as a profession.
• Assess students’ understanding of key learning points within chapters 1 to 4.
• Develop the ability to understand and interact with the nature of the financial statements in reality.
• Develop students’ communication skills, such as memo writing, essay writing, analysis and presentation of material.
• Develop basic ICT skills such as using the internet.

The TMA requires you to:

• Review various study chapters (from Chapter 1 to 4) of the textbook and apply some of the concepts within it.
• Conduct a simple information search using the internet.
• Present your findings and your answers within the specified word count.
• You should use a Microsoft Office Word and Times New Roman Font of 12 points.
• You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment.

General instructions for students:

Plagiarism: It is imperative that you write your answers using your own words. Plagiarism will be penalized depending on its severity and according to AOU plagiarism policy.

Word count: Your answers are expected to be within the specified word count. A 10% deviation from word count limit is acceptable. Not adhering to specified word count could result in the deduction of up to 4 marks of your total TMA mark.

Referencing: You are expected to use the Harvard referencing style for in-text referencing and list of reference at the end. Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

 E-library: You are expected to use E-library sources to support your answers. A minimum of 3 sources is required. Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

 Format and Presentation: In your answer, you should explain each point or inquire separately.

Use the following headings (below) to make up the different sections of your answer:

Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

A- The goal of accounting is to provide useful information for decisions.Therefore, financial accounting is governed by concepts and rules known as generally accepted accounting principles (GAAP).

Explain that sentence showing the qualitative characterstics of usefull information. [20 marks].

B- Choose the correct answer for the following items. (10 marks=1 mark each)

1) The assets of ABC Company are $260,000 and the total liabilities are $60,000.  The equity is ________.

1. A) $160,000
2. B) $220,000
3. C) $60,000
4. D) $200,000

2) Which of the following is not an asset account?

1. A) Notes Payable
2. B) Cash
3. C) Building
4. D) Accounts Receivable

3) ABIC Corporation records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent?

1. A) Economic entity assumption
2. B) Going concern assumption
3. C) Accounting period assumption
4. D) Monetary unit assumption

4) Which of the following is an internal user of a business's financial information?

1. A) Customers
2. B) Suppliers
3. C) Company manager
4. D) Government

5) Hala incurred $550 as a labor expense and promised to pay within 30 days. Which of the following accounts will increase as a result of this transaction?

1. A) Accounts Receivable
2. B) Cash
3. C) Accounts Payable
4. D) Retained Earnings

6) Which of the following statements is true of a trial balance?

1. A) A trial balance is the first step in the accounting cycle.
2. B) A trial balance is also known as a balance sheet.
3. C) A trial balance is a list of all accounts with their balances.
4. D) A trial balance is also known as the chart of accounts.

7) Which of the following statements is true of a sole proprietorship?

1. A) A sole proprietorship joins two or more individuals as co-owners.
2. B) The sole proprietor is personally liable for the liabilities of the business.
3. C) A sole proprietorship is taxed separately from the owner.
4. D) A sole proprietorship has to pay business income taxes.

8) Posting a transaction means ________.

1. A) calculating the balance in an account
2. B) transferring data from the journal to the ledger
3. C) preparing a summary of account balances
4. D) finding the account number in the chart of accounts

9) Basic steps in the recording process include all of the following except

1. A) transfer the journal information to the appropriate account in the statement of financial position.
2. B) analyze each transaction for its effect on the accounts.
3. C) enter the transaction information in a journal.
4. D) All of these answer choices are correct.

10) Which one of the following account groups normally has a credit balance?

1. A) liabilities and revenues
2. B) equity and assets
3. C) assets and liabilities
4. D) assets and expenses

C-  State whether the following statements are TRUE (T) or FALSE (F) ( 10 marks=1 mark each)

1. The first step in the recording process is to prepare financial statements.
2. The recording process occurs once a year.
3. A journal provides the balances for each account.
4. When three or more accounts are required in one journal entry, the entry is referred to as compound entry.
5. A complete journal entry does not show the new balance in the accounts affected by the transaction.
6. The entire group of accounts maintained by a company is called the Journal.
7. Management could determine the amounts due from customers by examining Accounts Receivable account.
8. Robitaille Company received a cash advance of $500 from a customer. As a result of this event, assets will be increased by $500.
9. Pastorek Company purchased equipment for $1,800 cash. As a result of this event, equity will be decreased by $1,800.
10. Root Company provided consulting services and billed the client $2,500. As a result of this event, assets are remained unchanged.

Transactions for Sand Company are presented below. Identify each transaction by number.

1. The company issued common stock in exchange for $500,000 cash.
2. Hired an employee to be paid $2,000 per week, starting tomorrow.
3. Purchased $8,000 of supplies on account.
4. Purchased equipment for $60,000, paying $40,000 in cash and signed a 30-day, $20,000, note payable.
5. Performed services for a customer on account for $60,000 and the customer promises to pay within this month.
6. Paid $4,000 in cash for the current month's rent.
7. Paid $5,000 cash on account for supplies purchased in transaction 3.
8. Received a bill for $5,500for advertising for the current month.
9. Paid $24,000 cash for salaries.
10. The company paid dividends of $18,000.
11. Received $26,000 for services previously performed on account.

Instructions: Read each of the above transactions, then:

1. Journalize each transaction (you may omit journal explanations) (22 marks)
2. Open T account for Cash and post the journal entries to Cash account ONLY, and then compute its balance. (3 marks).

A- Nora prepares her business accounts for the year ending 31 March each year. At 31 March 2020, the following general ledger balances were available:

Furniture 78,800- - Cash 20,200 – Notes payable 12,000 - Capital 280,000 - Drawings 1,000 – Supplies 12,000 - Revenues??? - Salaries expense 8,000 - Rent expense 2,000- Building 190,000 -

Required: Prepare a trial balance at March 31, 2020, and calculate the balance of Revenues (15 Marks)

B- Hala prepares her business accounts for the year ending 31 March each year. At 31 March 2020 the following general ledger balances were available: