HARAMAYA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
FUNDAMENTAL OF ACCOUNTING I

Individual Assignment (15%)

1. Describe how the following business transactions affect the three elements of the accounting equation.
a. Received cash for services performed.
b. Invested cash in business.
c. Paid for utilities used in the business.
d. Purchased supplies on account.
e. Purchased supplies for cash.

2. Suppose Mr Boris establishes a sole proprietorship to be known as Effective Garage, on September1, 2020.
During September, the business engages in the following transactions:

Transaction (1): Mr Boris starts business by depositing Br. 100,000 in a bank account opened in the name of
Effective Garage.
Transaction (2): Effective Garage bought land for Birr 20,000 in cash, to be used as a future site for the
business.
Transaction (3): Mr Boris bought office supplies for birr 2,500 on credit, to be used by the business.
Transaction (4): Effective Garage paid Birr. 1,500 to creditors on account.
Transaction (5): During the first month of operation, Effective Garage earned service Fees of Birr 30,000
receiving the amount in cash for the garage services it rendered.
Transaction (6): During the month of September, Effective Garage paid Birr 15,000 for different types of
expenses (birr 10,000 to salary of employees, birr 3000 Telephone, birr 1,500 for rent, and birr 500 for
advertisement).
Transaction (7): Mr Boris, the owner, withdrew Birr 3000 for his personal from the business.

Required:
A. Show the effect of every transaction in terms of increases and /or decreases in one or more of the
elements of the accounting equation so that the equality of the two sides of the accounting equation is
maintained.
B. Prepare the Income statements of Effective Garage for the year ended September 30, 2020.
C. Prepare statements of owners’ equity of Effective Garage for the year ended September 30, 2020.
D. Prepare the Balance sheet of Effective Garage on September 30, 2020.
E. Prepare the statements of cash flows of Effective Garage for the year ended September 30, 2020.
3. On January 1, 2010, Daniel Getachew, an ex-manager of Commercial Bank of Ethiopia, Arat Kilo Branch,
established his own consultancy business. He named his business "DG Consultancy Services". The objective
of the business is to render financial consultancy services to clients on a fee basis. The following
transactions are occurred during the first month of operation of the firm (from January 1 to 31 of January,
2010).

Transaction 1:
January 1: Daniel deposited birr 20,000 cash in a bank account in the name of his business- DG Consultancy
Services.

Transaction 2:
January 3: Daniel transferred furniture worth birr 30,000 from his home for office uses by DG Consultancy
Services. He also has extra home furniture and other personal assets worth birr 860,000.
Transaction 3:
January 6: the company purchased office supplies worth birr 5,000 from various suppliers agreeing to pay the
sum within two weeks.
Transaction 4:
January 7: DG paid Birr 3,000 cash for advertising its services through EBC.
Transaction 5:
January 10: DG received Birr 20,000 cash for consultancy services it rendered to cash clients.
Transaction 6:
January 11: DG purchased a used car for business purposes. The business paid birr 28,000 cash for the car.
Brokers estimated that the car currently worth birr 30,000 and the Inland Revenue assessed the car at birr
25,000 for property tax purposes.
Transaction 7:
January 14: DG received birr 10,000 additional cash investment from its owner.

Transaction 8:
January 16: DG rendered consultancy services worth Birr 15,000 to clients who promised to pay the sum within
two weeks.

Transaction 9:
January 18: DG paid birr 4,000 cash to suppliers for its credit purchase of supplies on January 4.
Transaction 10:
January 20: DG employed an accountant and a secretary for monthly salary of birr 1,200 and birr 700,
respectively.
Transaction 11:
January 21: DG borrowed birr 14,000 cash from Dashen Bank. The loan is repayable over six months.

Transaction 12:
January 29: DG incurred and paid for the following expenses. Wages birr 6,000, Rent birr 4,500, Utilities birr
1,200, and others birr 800.
Transaction 13:
January 27:DG collected birr 12,000 from its credit customers
Transaction 14:
January 30: DG paid birr 450 cash to Dashen Bank consisting of birr 400 principal and birr 50 one month
interest on part of the loan due in January.
Transaction 15:
January 31: DG paid its owner birr 5,000 cash to pay house utility expenses
Transaction 16:
January 31: DG determined that cost of supplies remained on hand at the end of the current month total birr
1,300.
Required:
A. Show the effect of every transaction in terms of increases and /or decreases in one or more of the
elements of the accounting equation so that the equality of the two sides of the accounting equation is
maintained.
B. Prepare the Income statements of "DG Consultancy Services" for the Month ended January 31, 2010.
C. Prepare statements of owners’ equity of "DG Consultancy Services" for the Month ended January 31,
2010
D. Prepare the Balance sheet of "DG Consultancy Services” on Month ended January 31, 2010
E. Prepare the statements of cash flows of "DG Consultancy Services “for the Month ended January 31,
2010
4. On Jan.1, 2020, Mr. Blue, established his own financial firm. He named his business "Blue Accounting
Firm". The objective of the business is to render Accounting services including the preparation of financial
statements to clients on a fee basis. The following transactions occurred during the first month of operation.

1) Jan.1: Blue deposited birr 20,000 cash in a bank account in the name of his business- Blue Accounting Firm.

2) Jan.4: Blue transferred equipment worth birr 30,000 from his home for office uses by Blue Accounting firm.
3) Jan.7: Blue accounting firm purchased office supplies worth birr 5,000 from different suppliers agreeing to
pay the sum within three weeks.

4) Jan.8: Blue paid Birr 3,000 cash for advertising its services.

5) Jan.9: Blue received Birr 20,000 cash for accounting service it rendered to cash clients.

6) Jan.11: Blue purchased a copy machine for business purposes. The business paid birr 28,000 cash for the
copy machine.

7) Jan.15: Blue received birr 10,000 additional cash investment from its owner.

8) Jan.16: Blue rendered Accounting service worth Birr 15,000 to clients who promised to pay the sum within
the coming ten days.

9) Jan.21: Blue paid Birr 4,000 cash to suppliers for its credit purchase of office supplies on Jan.7.

10) Jan.21: Blue borrowed Birr 14,000 cash from Commercial Bank of Ethiopia. The loan is repayable over six
months.

11) Jan.25: Blue collected Birr 12,000 from its credit customers.

12) Jan.27: Blue incurred and paid for the following expenses. Salary Birr 6,000, Rent Birr 4,500, Utilities Birr
1,200, and other expenses Birr 800.

13) Jan.30: Blue paid Birr 450 cash to Commercial bank of Ethiopia consisting of Birr 400 principal payment
and Birr 50 one month interest on part of the loan due in January.

14) Jan.31: Blue firm paid its owner birr 5,000 cash for his personal uses.

15) Jan.31: Blue determined that cost of office supplies remained on hand at the end of the month is Birr 1,300.

Required: Analyze and record the transaction by using the accounting equation based on the given chart of
accounts.
 Blue Accounting Firm

Asset = Liability + Owners Equity

CashEquipmentOffice SuppliesCopy MachineAcct Receivable = Acct PayableBank LoanBlue Capital

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