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Business In The City Of Madinat Zayed - Assignment Example

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The paper "Business In The City Of Madinat Zayed" proposes to consider the theoretical establishing a new business in the city of Madinat Zayed, United Arab Emirates. The business is named "Solutions Tech" and provides the services of repair and maintenance of computer systems…
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Business In The City Of Madinat Zayed
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Extract of sample "Business In The City Of Madinat Zayed"

Business In The City Of Madinat Zayed Scenario: Mr. [Your Name] and Mr. [Your Partner’s Name] has established a new business in the The business has been established to provide the services of repair and maintenance of computer systems and development and review of large companies’ computer networks and network security systems. The partners invested AED 40,000 each in the beginning of the year. The business became operational from March 2014. On March 01, 2014, the partners rented a building for the business at a monthly rent of AED 1,500 per month. The rent for the first month was paid in cash at that date. The partners also got one year insurance policy for the business and paid AED 7,500 in advance for the policy. On March 03, 2014, the partners purchased some stationery items required for running the business amounting AED 730 in cash. The stationery items include pens, pencils, diaries, customers’ registers etc. On March 05, 2014, the partners bought furniture for the business amounting AED 3,600 from Woodies Inc. on credit. The useful life of the furniture is estimated to be six (6) years. The partners also purchased a car for the school costing AED 24,000 from Mania Motors on the same date. AED 15,000 was paid at the time of purchase while the remaining balance is agreed to be settled in twenty (20) equal monthly installments. The useful life of car is estimated to be ten (10) years. All fixed assets are agreed to be depreciated on a straight-line basis. The Solutions Tech. has policy of charging full period depreciation in the period of purchase. The business received AED 6,000 from different customers for the services provided in the first month. AED 4,000 was received on March 03, 2014, while AED 1,150 was received on March 12, 2014 and AED 850 was received on March 25, 2014. AED 600 and AED 1,200 were outstanding on account of Mr. Yaqoob and Mr. Williams in respect of services rendered on March 16, 2014 and March 19, 2014 respectively. However, Mr. Yaqoob had settled his account by the end of the month. The business paid AED 2,000 to Woodies Inc on March 28, 2014 on account of the furniture purchased. The Solutions Tech. also received an amount of AED 1,200 on March 31, 2014 in advance on account of development of Internal Network of “Ziad Consultants & Co.”. The work will be performed in April 2014. The business also purchased the advertisement services of “Metro Media” for advertising the newly established business at a cost of AED 2,000 on March 13, 2013. The partners paid only AED 800 on March 18, 2013 for the services rendered. The remaining amount is outstanding till the period end. Mr. [Your/ Partner’s Name] has withdrawn an amount of AED 1,400 for personal use on March 31, 2014. SOLUTION: Solutions Tech. Chart of Accounts As at March 31, 2014 No. Account Title To Increase Description of Account Asset Accounts: 100 Furniture Debit Furniture purchased for the business 105 Motor Vehicle Debit Motor Vehicle purchased for the business 110 Prepaid Insurance Debit Insurance policy purchased and paid 140 Accumulated Depreciation- Furniture Credit Accumulated Depreciation charged on Furniture 141 Accumulated Depreciation- Motor Vehicle Credit Accumulated Depreciation charged on Motor Vehicle 180 Cash Debit Currency, coins, checks received but not yet deposited and account balance 185 Accounts Receivable Debit Amount due from customers 190 Stationery Items Debit Stationery items used in the normal course of business Liability Accounts: 210 Accounts Payable Credit Amount payable to the seller/ supplier 220 Accrued Income Credit Income received but not yet accrued Owner’s Equity Accounts: 290 Mr. [Your Name] Capital Credit Amount invested in the business plus the earnings not withdrawn 291 Mr. [Your Partner’s Name] Capital Credit Amount invested in the business plus the earnings not withdrawn 295 Drawings Debit Amount withdrew by the investor from his personal capital in the company Operating Revenue Accounts: 300 Revenue- Services Credit Revenue earned from providing services Operating Expense Accounts: 410 Rent Expense Debit Rent paid for the building of school 411 Advertisement Expense Debit Expenses paid for the advertisement of the business 420 Depreciation Expense Debit Depreciation charged on Furniture and Motor Vehicle Solutions Tech. Journal Entries For the Period Ended March 31, 2014 JOURNAL ENTRIES Date No. Description Debit AED Credit AED 01-03-2014 180 Cash 80,000 290 Mr. [Your Name] Capital 40,000 291 Mr. [Your Partner’s Name] Capital 40,000 01-03-2014 410 Rent Expense 1,500 180 Cash 1,500 01-03-2014 110 Prepaid Insurance 7,500 180 Cash 7,500 03-03-2014 180 Cash 4,000 300 Revenue- Services 4,000 03-03-2014 190 Stationery Items 730 180 Cash 730 05-03-2014 100 Furniture 3,600 210 Accounts Payable 3,600 05-03-2014 105 Motor Vehicle 24,000 180 Cash 15,000 210 Accounts Payable 9,000 12-03-2014 180 Cash 1,150 300 Revenue- Services 1,150 13-03-2014 411 Advertisement Expense 2,000 210 Accounts Payable 2,000 16-03-2014 185 Accounts Receivable 600 300 Revenue- Services 600 18-03-2014 210 Accounts Payable 800 180 Cash 800 19-03-2014 185 Accounts Receivable 1,200 300 Revenue- Services 1,200 25-03-2014 180 Cash 850 300 Revenue- Services 850 28-03-2014 210 Accounts Payable 2,000 180 Cash 2,000 31-03-2014 180 Cash 1,200 220 Accrued Income 1,200 31-03-2014 180 Cash 600 185 Accounts Receivable 600 31-03-2014 420 Depreciation Expense 50 140 Accumulated Depreciation- Furniture 50 31-03-2014 420 Depreciation Expense 200 141 Accumulated Depreciation- Motor Vehicle 200 31-03-2014 295 Drawings 1,400 180 Cash 1,400 Solutions Tech. Ledger Accounts As at March 31, 2014 Cash Account No. Description AED No. Description AED 290 Mr. [Your Name] Capital 40,000 410 Rent Expense 1,500 291 Mr. [Your Partner’s Name] Capital 40,000 110 Prepaid Insurance 7,500 300 Revenue- Services 4,000 190 Stationery items 730 300 Revenue- Services 1,150 105 Motor Vehicle 15,000 300 Revenue- Services 850 210 Accounts Payable 800 220 Accrued Income 1,200 210 Accounts Payable 2,000 185 Accounts Receivable 600 295 Drawings 1,400 Closing Balance 58,870 87,800 87,800 Capital Account- Mr. [Your Name] No. Description AED No. Description AED Closing Balance 40,000 180 Cash 40,000 40,000 40,000 Capital Account- Mr. [Your Partner’s Name] No. Description AED No. Description AED Closing Balance 40,000 180 Cash 40,000 40,000 40,000 Drawings Account No. Description AED No. Description AED 180 Cash 1,400 Closing Balance 1,400 1,400 1,400 Rent Expense Account No. Description AED No. Description AED 180 Cash 1,500 Closing Balance 1,500 1,500 1,500 Advertisement Expense Account No. Description AED No. Description AED 210 Accounts Payable 2,000 Closing Balance 2,000 2,000 2,000 Depreciation Expense Account No. Description AED No. Description AED 140 Accumulated Depreciation- Furniture 50 Closing Balance 250 141 Accumulated Depreciation- Motor Vehicle 200 250 250 Prepaid Insurance Account No. Description AED No. Description AED 180 Cash 7,500 Closing Balance 7,500 7,500 7,500 Revenue- Services Account No. Description AED No. Description AED Closing Balance 7,800 180 Cash 4,000 180 Cash 1,150 185 Accounts Receivable 600 185 Accounts Receivable 1,200 180 Cash 850 7,800 7,800 Accrued Income Account No. Description AED No. Description AED Closing Balance 1,200 180 Cash 1,200 1,200 1,200 Stationery Items Account No. Description AED No. Description AED 180 Cash 730 Closing Balance 730 730 730 Accounts Receivable Account No. Description AED No. Description AED 300 Revenue- Services 600 180 Cash 600 300 Revenue- Services 1,200 Closing Balance 1,200 1,800 1,800 Accounts Payable Account No. Description AED No. Description AED 180 Cash 800 100 Furniture 3,600 180 Cash 2,000 105 Motor Vehicle 9,000 Closing Balance 11,800 411 Advertisement Expense 2,000 14,600 14,600 Furniture Account No. Description AED No. Description AED 210 Accounts Payable 3,600 Closing Balance 3,600 3,600 3,600 Motor Vehicle Account No. Description AED No. Description AED 180 Cash 15,000 Closing Balance 24,000 210 Accounts Payable 9,000 24,000 24,000 Accumulated Depreciation Account- Furniture No. Description AED No. Description AED Closing Balance 50 420 Depreciation Expense 50 50 50 Accumulated Depreciation Account- Motor Vehicle No. Description AED No. Description AED Closing Balance 200 420 Depreciation Expense 200 200 200 Solutions Tech. Trial Balance As at March 31, 2014 No. Description Debit (AED) Credit (AED) 108 Cash 58,870 290 Capital Account- Mr. [Your Name] 40,000 291 Capital Account- Mr. [Your Partner’s Name] 40,000 295 Drawings 1,400 100 Furniture 3,600 105 Motor Vehicle 24,000 110 Prepaid Insurance 7,500 140 Accumulated Depreciation- Furniture 50 141 Accumulated Depreciation- Motor Vehicle 200 185 Accounts Receivable 1,200 190 Stationery Items 730 210 Accounts Payable 11,800 220 Accrued Income 1,200 300 Revenue- Services 7,800 410 Rent Expense 1,500 411 Advertisement Expense 2,000 420 Depreciation Expense 250 101,050 101,050 Solutions Tech. Income Statement For the Period Ended March 31, 2014 AED AED Revenue 7,800 Less: Operating Expenses Rent Expense 1,500 Advertisement Expense 2,000 Depreciation Expense 250 (3,750) Net Profit 4,050 Solutions Tech. Statement of Owner’s Equity As at March 31, 2014 AED AED Opening Capital - Capital Introduced Mr. [Your Name] 40,000 Mr. [Your Partner’s Name] 40,000 80,000 Add: Net Profit 4,050 Less: Drawings (1,400) Closing Capital 82,650 Solutions Tech. Balance Sheet As at March 31, 2014 AED AED ASSETS: Non-Current Assets Furniture 3,600 Less: Accumulated Depreciation (50) 3,550 Motor Vehicle 24,000 Less: Accumulated Depreciation (200) 23,800 Prepaid Insurance 7,500 Total Non-Current Assets 34,850 Current Assets Stationery Items 730 Accounts Receivable 1,200 Cash 58,870 60,800 Total Assets 95,650 EQUITY AND LIABILITIES: Equity Opening Capital - Capital Introduced 80,000 Add: Net Profit 4,050 Less: Drawings (1,400) 82,650 Liabilities Accounts Payable 11,800 Accrued Income 1,200 13,000 Total Equity and Liabilities 95,650 Read More
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