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MGT101 Assignment#01 Solved

Financial Accounting
Semester Spring 2016
Solution Assignment # 1 (MGT101)
Date 11th may 2016
Administrator Expenses

Payment of Salaries 40,000 
Advertisement 30,000 
Total 70,000 
Financial Expenses

Bank charges deducted 5,000 
Loan taken from Bank 10 % 4,800 
Repairs maintenance 50,000 
Freight Outwards 20,000 
Total 79,700 
Revenue

Goods sold on credit basis 43,000 
Goods sold on cash basis 120,000 

Total 163,000 
Intangible Assets

Goodwill 60,000 
Copy rights 35,000 
Total 95,000 
Liabilities

Goods Purchased on credit basis 44,000 
Loan Taken from bank on 31st January 2015 @10% per annum 48,000 
Total 92,000

  • Revenue
    Formal Definition:The gross increase in owner's equity resulting from the operations and other activities of the business.

Informal Definition:Amounts a business earns by selling services and products and investing. Amounts billed to customers for services and/or products.

    • Operating Revenue
      Revenues resulting from the normal operations of a business such as the revenues resulting from the sale of products and services to your customers.
      • Sales
        • Products
        • Services
      • Sales Discounts (Contra-Revenue Account)
      • Sales Returns and Allowances (Contra-Revenue Account)
    • Non-Operating Revenue and Gains
      Non-operating revenue accounts include all types of income that you receive that are not part of your main line of business. In other words, revenues or gains resulting from something other than from normal business operations.
      • Interest Income
      • Dividends
      • Commissions
      • Rental Income
      • Gain On Sale Of Assets
      • Gains -Other Unusual
  • Expenses
    Formal Definition:Decrease in owner's equity resulting from the cost of goods, fixed assets, and services and supplies consumed in the operations of a business.

Informal Definition:The costs of doing business. The stuff we used and had to pay for or charge to run our business.

  • Cost of Sales or Cost of Goods Sold
    Cost of Goods Sold - the cost of the products purchased or manufactured and sold by a business.
    • Cost Of Goods Purchased and Sold
      • Purchases
        A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. This account reports the gross amount of purchases of merchandise. Net purchases is the amount of purchases minus purchase returns, purchase allowances, and purchase discounts. While the Purchases Accounts are normally classified as temporary expense accounts, they are actually "hybrid" accounts. The purchase accounts are used along with freight and the beginning and ending inventory to determine the Cost Of Goods Sold.
      • Purchase Discounts (Contra Account)
      • Purchase Returns and Allowances (Contra Account)
      • Freight
    • Cost Of Goods Manufactured and Sold
  • Operating Expenses
    Operating Expenses - the expenses related to normal daily operations such as wages, rent, advertising, insurance, etc. These expenses are related to the normal operations of the business (primary activities) and are incurred in order to earn normal operating revenues. In other words, amounts spent on products and services related to normal business operations.

While not absolutely necessary, the Operating Expenses are often grouped into two main functional areas of operation:

  • Selling Expenses
    Selling Expenses are expenses incurred and related to making sales. Examples are sales salaries & wages, fringe benefits, advertising, travel, entertainment, catalogues, rent, utilities, telephone, commissions, warehousing, shipping, depreciation, office supplies, postage, etc.
  • General and Administrative Expenses (G&A)
    G & A Expenses are related to the general operations or overall administration of the business. Examples are administrative salaries & wages (officers, office, accounting, management, and human resources), fringe benefits, supplies, rent, utilities, telephone, travel, entertainment, depreciation, office supplies, postage, legal & accounting fees, etc.
1. Administration expense
Payment of salaries to employees 40,000.00 
Repairs and maintenance 50,000.00 
Advertisement 30,000.00 
Freight Outwards 20,000.00 
Total 140,000.00 

2. Financial Expense
Bank charges deducted 5,000.00 
Loan taken from bank on 31st January 2015 @10% per annum 4,800.00 
Total 9,800.00 

3. Liabilities
Goods purchased on credit basis 44,000.00 
Loan taken from bank on 31st January 2015 @10% per annum 48,000.00 
Total 92,000.00 

4. Intangible assets
Goodwill 60,000.00 
Copy rights 35,000.00 
Total 95,000.00 

5. Revenue
Goods sold on cash basis 120,000.00 
Total 120,000.00

solution is Totally wrong
1. advertisement is selling expenses so it will not be included.
fraight outward is not administrative expenses it will be subtracted from sales to find revenue.
so Admin expenses will be only 90,000

2. interest on loan is not 4800 it is 4400 as loan is taken on 31st Januray so Interest will be calculated for 11 months.

3. In Liabilities Interest on Loan 4400 will also be added.

4. its good

5. in revenue freight outward will be subtracted from sales.

Tayyab bro can you upload right solution???

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