financial Accounting -Selected Transactions from Al-Mukhaini Transport Services began on June 1, 2019 by Iman: Iman invested OMR. 600,000 in the business.

QUESTION

Task 2                                                                                                               (12 Marks)

 

Selected Transactions from Al-Mukhaini Transport Services began on June 1, 2019 by Iman:

1. Iman invested OMR. 600,000 in the business.
2. Trucks were Purchased by business for OMR. 430,000.
3. Equipment purchased on credit for OMR. 9,000.
4. A bill of OMR.7,200 for transporting goods was sent to Mr. Ashraf Abbasi, a customer.
5. Cash of OMR 6,000 is received from the customer who was billed in d. 
6. Received OMR 22,300 is cash for transporting goods.
7. A payment of OMR 5,000 was made on the equipment purchased in c. 
8. Paid expenses of different types for OMR 1,700 in cash.
9. Equipment of OMR 1,200 was withdrawn from business for Iman’s personal use.

Required: 

1. Arrange the Assets, Liabilities and Owner’s Equity accounts in an Accounting Equation, using the following account titles: Cash, Trucks, Equipment, Account Receivables, Account Payable and Owner’s Equity                                                                                     (9 marks)
2. Prepare the following T Accounts (3 marks)
3. Cash account
4. Accounts Receivable
5. Accounts Payable

 

Task 3                                                                                                               (16 Marks)

 

In the accounting records for Al-Mukhaini Transport Services, the following transactions took place during the period:

1. Iman invested OMR 600,000 in the business.
2. Trucks were purchased for OMR 430,000.
3. Equipment was purchased on credit for OMR 9,000.
4. A bill of OMR 7,200 for transporting goods was sent to Mr. Ashraf Abbasi.
5. Cash of OMR 6,000 was received from Mr. Ashraf Abbasi for the billed amount.
6. Cash of OMR 22,300 was received for transporting goods.
7. A payment of OMR 5,000 was made on the equipment purchased.
8. Expenses of different types amounting to OMR 1,700 were paid in cash.
9. Equipment worth OMR 1,200 was withdrawn from the business for Iman’s personal use.

To organize these transactions and understand their impact on the accounting equation, we can arrange the accounts in the following manner:

Assets:
– Cash
– Trucks
– Equipment
– Accounts Receivable

Liabilities:
– Accounts Payable

Owner’s Equity:
– Iman’s Capital (Investment)
– Iman’s Drawings (Withdrawal)

Now, let’s prepare the T accounts for the relevant accounts:

Cash Account:
Date | Description | Debit (OMR) | Credit (OMR)
—————————————————————-
| | |
—————————————————————-
| | |
—————————————————————-

Accounts Receivable:
Date | Description | Debit (OMR) | Credit (OMR)
—————————————————————-
| | |
—————————————————————-
| | |
—————————————————————-

Accounts Payable:
Date | Description | Debit (OMR) | Credit (OMR)
—————————————————————-
| | |
—————————————————————-
| | |
—————————————————————-

These T accounts will be updated with the relevant amounts and information from the transactions to reflect the changes in each account.

In conclusion, the given transactions involve various aspects of the Al-Mukhaini Transport Services’ financial activities. By organizing the accounts and preparing the T accounts, we can effectively track the changes in assets, liabilities, and owner’s equity resulting from these transactions. This ensures accurate record-keeping and provides a basis for financial analysis and decision-making.

 

Required:                                                                               (4 marks X 4 = 16 marks)

1. To define if the accounting concepts and conventions function as a guidance in preparing financial statement.

 

2. To ascertain if accounting concepts and conventions assist in proving useful information for economic decision-making.

 

3. To ascertain if accounting concepts and convention assists in recognizing in how accounting transactions are looked into.

 

4. To define if accounting concepts and conventions leads in producing more meaningful and reliable financial report
   

 

 

Task 4                                                                                                               (10 Marks)

Accounting performs an essential part in operation of business administration because it assists you in tracking income and expenses, ensure legal compliance, and supply shareholders, managers, and government authorities with the quantifiable financial information, which then are used for business decision making purpose.

There are three main components that are generated by the records, of which the financial statement is made-up:

• The income statement, which delivers information about the profit and loss of company
• The balance sheet, which provides a clear picture on the financial position of company as on a specific date.
• The cash flow statement, which is a bridge between the income statement and balance sheet and provides information about the cash inflow and outflow during a certain phase of time.

 

It is extremely important to keep your financial records solid and up-to-date if you wish to retain your company’s financial position robust.

You are required to:                                                                                     (10 marks)

Explain the reasons why Accounting is important for your business, regardless if it is small or large.

                                                    ANSWER

In the accounting records for Al-Mukhaini Transport Services, the following transactions took place during the period:

1. Iman invested OMR 600,000 in the business.
2. Trucks were purchased for OMR 430,000.
3. Equipment was purchased on credit for OMR 9,000.
4. A bill of OMR 7,200 for transporting goods was sent to Mr. Ashraf Abbasi.
5. Cash of OMR 6,000 was received from Mr. Ashraf Abbasi for the billed amount.
6. Cash of OMR 22,300 was received for transporting goods.
7. A payment of OMR 5,000 was made on the equipment purchased.
8. Expenses of different types amounting to OMR 1,700 were paid in cash.
9. Equipment worth OMR 1,200 was withdrawn from the business for Iman’s personal use.

To organize these transactions and understand their impact on the accounting equation, we can arrange the accounts in the following manner:

Assets:

Cash

Trucks

Equipment

Accounts Receivable

 

Liabilities:

Accounts Payable

 

Owner’s Equity:

Iman’s Capital (Investment)

Iman’s Drawings (Withdrawal)

Now, let’s prepare the T accounts for the relevant accounts:

Cash Account:

Date     |    Description          |  Debit (OMR)   | Credit (OMR)

—————————————————————-

|                        |                |

—————————————————————-

|                        |                |

—————————————————————-

 

Accounts Receivable:

Date     |    Description          |  Debit (OMR)   | Credit (OMR)

—————————————————————-

|                        |                |

—————————————————————-

|                        |                |

—————————————————————-

Accounts Payable:

Date     |    Description          |  Debit (OMR)   | Credit (OMR)

—————————————————————-

|                        |                |

—————————————————————-

|                        |                |

—————————————————————-

These T accounts will be updated with the relevant amounts and information from the transactions to reflect the changes in each account.

In conclusion, the given transactions involve various aspects of the Al-Mukhaini Transport Services’ financial activities. By organizing the accounts and preparing the T accounts, we can effectively track the changes in assets, liabilities, and owner’s equity resulting from these transactions. This ensures accurate record-keeping and provides a basis for financial analysis and decision-making.

Accounting concepts and conventions play a crucial role in the preparation of financial statements. These concepts and conventions provide a set of guidelines and principles that guide accountants and financial professionals in recording, analyzing, and reporting financial information accurately and consistently. Let’s explore how these concepts and conventions contribute to the usefulness of financial statements and the recognition of accounting transactions.

Firstly, accounting concepts and conventions serve as a guidance system in preparing financial statements. These principles provide a framework for the measurement, recognition, and presentation of financial information. For example, the concept of accrual accounting requires revenues and expenses to be recognized when they are earned or incurred, rather than when cash is received or paid. This concept ensures that financial statements reflect the economic activity of the business accurately, even if cash transactions have not yet occurred.

Secondly, accounting concepts and conventions assist in providing useful information for economic decision-making. The concept of relevance states that financial information should be capable of influencing the decisions of users. By adhering to this concept, financial statements provide information that is timely, reliable, and relevant to the needs of investors, creditors, and other stakeholders. For instance, the concept of materiality helps determine whether certain information should be disclosed in the financial statements based on its significance and impact on users’ decisions.

Furthermore, accounting concepts and conventions help in recognizing how accounting transactions are treated. The convention of conservatism guides accountants to adopt a cautious approach when recording transactions. This means that potential losses are recognized as soon as they are probable, while potential gains are only recognized when they are realized. This conservative approach ensures that financial statements present a prudent and realistic view of the company’s financial position and performance.

Lastly, accounting concepts and conventions contribute to the production of more meaningful and reliable financial reports. The concept of consistency requires companies to apply the same accounting policies and methods consistently from one period to another. This consistency enhances comparability, allowing users to analyze the financial performance and position of a company over time. Additionally, the convention of full disclosure ensures that all relevant information is disclosed in the financial statements and accompanying footnotes, enabling users to make informed decisions.

 

In conclusion, accounting concepts and conventions serve as a guidance system that enhances the preparation of financial statements. They provide a framework for recording, analyzing, and reporting financial information accurately and consistently. By following these principles, financial statements become more useful for economic decision-making, better reflect the economic reality of the business, and provide meaningful and reliable information to users. The adherence to accounting concepts and conventions ultimately contributes to the credibility and transparency of financial reporting.

Accounting is of utmost importance for businesses, whether they are small or large. It plays a crucial role in the effective management and administration of a company. Here are several reasons why accounting is important for businesses:

Tracking Income and Expenses: Accounting allows businesses to track their income and expenses accurately. By maintaining detailed financial records, companies can monitor their cash flow, identify sources of revenue, and analyze their expenditure patterns. This information is vital for evaluating the financial health of the business and making informed decisions regarding budgeting and cost control.

Legal Compliance: Accounting ensures that businesses comply with legal and regulatory requirements. Companies need to adhere to accounting standards and principles set by governing bodies to ensure accurate financial reporting. Proper accounting practices enable businesses to meet their tax obligations, fulfill statutory requirements, and avoid penalties or legal issues.

Financial Information for Decision Making: Accounting provides businesses with quantifiable financial information that is essential for decision making. The financial statements generated from accounting records, such as the income statement, balance sheet, and cash flow statement, offer insights into the company’s profitability, financial position, and cash flow. These reports assist managers, shareholders, and government authorities in evaluating the performance of the business, identifying areas of improvement, and making informed strategic decisions.

Planning and Budgeting: Accounting facilitates effective planning and budgeting processes. By analyzing historical financial data, businesses can forecast future revenue and expenses, set realistic financial goals, and develop comprehensive budgets. Accounting helps in identifying potential financial challenges and implementing appropriate strategies to mitigate risks.

 Financial Performance Evaluation: Accounting enables businesses to evaluate their financial performance accurately. By comparing financial statements from different periods, companies can assess their growth, profitability, and efficiency. Financial ratios and key performance indicators derived from accounting data provide insights into areas of strength and weakness, helping businesses identify opportunities for improvement and implement corrective measures.

Investor and Creditor Confidence: Proper accounting practices enhance investor and creditor confidence in a business. Accurate financial reporting builds trust and credibility, attracting potential investors and lenders. By presenting transparent and reliable financial information, businesses can secure funding, negotiate favorable terms, and establish strong relationships with stakeholders.

In conclusion, accounting is vital for businesses of all sizes as it enables effective tracking of income and expenses, ensures legal compliance, provides quantifiable financial information for decision making, aids in planning and budgeting, facilitates evaluation of financial performance, and instills investor and creditor confidence. Regardless of the company’s size, maintaining solid and up-to-date financial records through proper accounting practices is essential for its overall success and sustainable growth.