Question 3) Wendy opened a hair care products shop in Georgetown in September 2020. During the first month of operations, the business completed the following transactions.

Sep 1

Wendy invested RM80,000 cash into the business.

Sep 2

She obtained a bank loan of RM80,000 for the business

Sep 8

Bought goods on credit for RM75,000 from Century Saloon Supply

Sep 10

Distributed free sample worth RM1,000 from her stocks

Sep 12

Shampoo costing RM180 was taken from business stock as a personal gift to her friend

Sep 16

Purchased a cash register worth RM2,500 on credit from Smart Solution

Sep 17

Brought in his personal computer worth RM3,800 for business use

Sep 19

Installed a security system for his office, total bill received from his supplier, Secure System was RM9,600

Sep 24

Withdrawn goods bought for resale for her personal use, value of the goods was RM680

Sep 28

Withdrew RM800 from business bank account for her personal use

Required:

Record the above transactions in the GENERAL JOURNAL. Narratives are not required. (20 marks)

 

 Sep. 1 Cash      RM 80,000.00 
              Capital	       RM 80,000.00 

      2	Cash	     80,000.00 
              Loan Payable	 	   80,000.00 

	  8 Inventory      75,000.00 
            Accounts Payable	   75,000.00 

      10 Advertisement  1,000.00 
         	Inventory	 	     1,000.00 

     12 Drawings         180.00 
             Inventory           180.00 

     16 Office Equipment  2,500.00 
             Accts. Payable        2,500.00          

     17 Office Equipment   3,800.00 
                   Capital          3,800.00 

     19 utilities Expense     9,600.00 
                 Utilities Payable     9,600.00 

     24 Drawings         680.00 
                 Inventory           680.00 

     28 Drawings         800.00 
                   cash           800.00 

Step-by-step explanation

Explanation for each transaction:

Sep.

1 - The amount invested is a debit to cash and credit to capital for 80,000 because it is an investment from the owner.

2 - Debit again to cash but this time it is credited to loan payable for 80,000 because the amount is loaned from bank.

8 - Debit the goods to inventory and credit to accounts payable for 75,000. Take note of the term 'on credit'

10 - distribution of goods is a form of advertising it so debit it to advertisement and credit it to inventory for 1,000.

12 - anything used for personal purpose will result to reduction of capital. but we don't debit capital when making a journal entry. so in this case you will debit drawings or withdrawal and credit to inventory (because it came from goods/stock) for 180.

16 - first, you should debit office equipment and then we credit accounts payable (because we see again 'on credit') for 2,500.

17 - we debit again office equipment. but this time it came from the personal items of the owner so there will be an addition to its investment. therefore, credit will be Capital for 3,800.

19 - you should debit the expense account and credit as payable because it was just billed not yet paid. amount is 9,600.

24 - just like in entry for sep. 12, it is again for personal purpose. so debit drawings and credit inventory for 680.

28 - this is similar to entries for sep. 12 and 24. so we debit again drawings. but the credit here will be different. on 12 and 24, the goods or stock was used for personal use. this time it will be cash, so we credit cash for 800.

Please see the attached file for the complete solution