College of Administration and Finance Sciences

Assignment (1)
Deadline: Saturday 12/10/2024 @ 23:59

Course Name: Principles of Accounting Student’s Name: Faisal Meshaal Al-Harbi

Course Code: ACCT101 Student’s ID Number: S230009267
Semester: First Term 24/25 CRN:
Academic Year: 1446 H

For Instructor’s Use only

Instructor’s Name: Khaled Almuaqel
Students’ Grade: /15 Level of Marks: High/Middle/Low

Instructions – PLEASE READ THEM CAREFULLY

 The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
 Assignments submitted through email will not be accepted.
 Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
 Students must mention question number clearly in their answer.
 Late submission will NOT be accepted.
 Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No
exceptions.
 All answers must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism.
 Submissions without this cover page will NOT be accepted.
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Assignment Question(s): (Marks 15)

Question 1: (5 Marks)
Abdulaziz is the owner of a service company that provides consulting services and charges the
clients for them. He uses a journal to record his business transactions. Below are some of the
transactions that occurred in July 2024. For each transaction, apply the rules of double-entry
accounting by preparing the journal entry in SAR currency and explain the effect on the accounting
equation.
1. On July 1, Abdulaziz invested SAR 50,000 cash in his business to start operations.
2. On July 6, the company bought office equipment worth SAR 15,000 on credit from a supplier.
3. On July 10, the company received SAR 5,000 cash in advance from customer for providing
consulting services next month.
4. On July 16, the company paid SAR 4,000 cash for utility bills for the month.
5. On July 21, the company made a cash payment of SAR. 15,000 on the equipment that purchased
on account on July 6th.
6. On July 28, the company performed services worth SAR 6,000 and the bill was sent to the
customer.

Answer

1.

Introduction: Abdulaziz invested SAR 50,000 cash

Date Account Debit (SAR) Credit (SAR)

July 1 Cash 50,00

July 1 Owner’s Equity 50,000

Conclusion: Investment leads to an increase in assets and the equity of the owners.

2.

Introduction: The company bought office equipment worth SAR 15,000 using credit from a supplier

Res Date Account Debit (SAR) Credit (SAR)

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July 6 Office Equipment 15,000

July 6 Accounts payable 15,000

Conclusion: Purchasing office equipment using credit leads to an increase in asset and liability

(account payable)

3.

Introduction: The company received an advanced payment of SAR 5,000 in cash from the customer.

Date Account Debit (SAR) Credit (SAR)

July 10 Cash 5,000

July 10 Revenue (unearned) 5,000

Conclusion: This led to an increase in cash and an increase in liability which is advance payment of

customers which is not earned yet.

4.

Introduction: The company paid SAR 4,000 cash for utility bills for the month.

Date Account Debit (SAR) Credit (SAR)

July 16 Expense (Utility expense) 4,000

July 16 Cash 4,000

Conclusion: This led to an increase in expense and a reduction in the asset (cash).

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Introduction: The company made a cash payment of SAR. 15,000 on the equipment

Date Account Debit (SAR) Credit (SAR)

July 21 Accounts payable 15,000

July 21 cash 15,000

Conclusion: There is a decrease in both asset (cash) and liability (accounts payable)

6.

Introduction: The company performed services worth SAR 6,000

Date Account Debit (SAR) Credit (SAR)

28th July Accounts receivable 6,000

28th July Service 6,000

Conclusion: Conclusion: There is an increase in both assets (cash) and revenue.

Question 2: (5
Marks)

What is the accounting cycle? Explain every step starting from analyzing transactions to
preparing post-closing trial balance. (Marks5)

Answer

The accounting cycle is the process of determining, examining and recording the financial statements

of a company (Warren, 2018). It has 8 processes that start when a transaction takes place and
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Steps

1. Transactions identification: This is the first step accounting cycle where all the transactions in

the company are identified. This includes sales, payment, refunds, etc.

2. Recording of the transaction in the journal: This is where the transactions identified in step

one is recorded into the journal based on the receipt of an invoice, sales recognitions and

completion of all economic events (Hasanah et al., 2022.

3. Posting: This is a step where all the journal entries are posted to an account in the general

ledger.

4. Preparation of unadjusted trial balance: This is where the journal entries posted are now

recorded in the unadjusted trial balance to ensure all total debits are equal to all the recorded

finance.

5. Preparation of worksheet: This is a step where a worksheet is developed with debits and

credits listed to determine necessary adjustments in the entries just in case of discrepancies.

6. Adjustment of journal entries: This is where journal entries are adjusted using the updated

worksheet and time passage (Hasanah et al., 2022).

7. Preparation of the financial statements: This is prepared after the adjusted entries are posted

and the adjusted trial balance.

8. Closing of the books: This is the last step of the accounting cycle where temporary accounts,

revenues and expenses are finalized at the end of the period using closing entries (Hasanah et

al., 2022).

Question 3: (5
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ABC Consulting is a company that provides consulting services to clients in various industries. The
following are the balances taken from the trial balance:
ABC
Trial Balance
31/12/2023
Debit Credit
Account (SAR) (SAR)
Cash 10,000 -
Accounts Receivable 15,000 -
Supplies 5,000 -
Equipment 50,000 -
Accumulated Depreciation -
Equipment - 10,000
Accounts Payable - 8,000
Unearned Revenue - 12,000
Common Stock - 40,000
Dividends 5,000 -
Service Revenue - 60,000
Salaries Expense 25,000 -
Rent Expense 10,000 -
Depreciation Expense 5,000 -
Supplies Expense 3,000 -
Interest Expense 2,000 -
130,00
Total 130,000 0

Required:
1. Prepare the income statement for the year ended 31 December 2023.
2. Prepare the statement of retained earnings for the year ended 31 December 2023.
3. Prepare the balance sheet as at 31 December 2023.

Answer
1.

Introduction

The income statement shows the organization’s revenues, expenses and net income in a logical manner. The

income statement is also called a profit and loss statement or earning statement (Ragas, 2024).
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Income statement for the year ended 31 December 2023

Account Debit (SAR) Credit (SAR)

Revenue 60,000

Total Revenue 60,000

Expenses

Salaries Expense 25,000

Rent Expense 10,000

Depreciation Expense 5,000

Supplies Expense 3,000

Interest Expense 2,000

Total Expenses 45,000

Net Income 15,000

Conclusion: Net income is equal to Total revenue minus total expenses. The net income for the year ended

31 December 2023 is positive which shows that the company made a profit.

2.

Introduction

A statement of retained earnings is a document that displays changes in retained earnings of an

organization over a specific period. This statement can be also called an equity statement, owner’s

equity statement or shareholders’ equity statement (Franklin, 2020).

Res Statement of retained earnings for the year ended 31 December 2023
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Account Debit (SAR) Credit (SAR)

Retained Earnings, 1 Jan 2023 40,000

Add Net Income 15,000

Less Dividends 5,000

Retained Earnings, 31 Dec

50,000
2023

Conclusion: Retained Earnings at the end of the year are equal to the total retained earnings at the

beginning of the year plus the net income minus the dividends.

3.

Introduction

The balance sheet is one of the main financial statements that are used to evaluate the financial

performance of the company. It follows the accounting principle that states that assets are equal to

total liabilities and shareholder equity (Madina, 2021).

Balance sheet as of 31 December 2023

Account Debit (SAR) Credit (SAR)

Assets

Cash 10,000

Accounts Receivable 15,000

Supplies 5,000

Res Equipment 50,000

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Less: Accumulated
10,000
Depreciation - Equipment

Total Assets 70,000

Liabilities

Accounts Payable 8,000

Unearned Revenue 12,000

Total Liabilities 20,000

Equity

Common Stock 40,000

Retained Earnings 50,000

Total Equity 50,000

Total Liabilities and Equity 70,000 70,000

Conclusion: Debit and Credit are balanced!

References

Warren, C. S., Reeve, J. M., & Duchac, J. E. (2018). Accounting. Cengage Learning.

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Hasanah, U., Rasyiqah, S. Z., Mawaddah, W., & Muda, I. (2022). The Steps In The Accounting

Cycle and How To Prepare Correcting Entries. Journal of Positive School Psychology, 6(3),

2388-2394.

Ragas, M. W., & Culp, R. (2024). Income Statement: Public Companies. In Business Acumen for

Strategic Communicators: The Workbook (pp. 53-58). Emerald Publishing Limited.

Madina, E. (2021, March). BALANCE SHEET STRUCTURE: BALANCE ASSETS AND

LIABILITIES. In E-Conference Globe (pp. 195-199).

Franklin, M., Graybeal, P., & Cooper, D. (2020). LO 2.1 Describe the Income Statement, Statement

of Retained Earnings, Balance Sheet, and Statement of Cash Flows, and How They

Interrelate. v2 Principles of Accounting--Financial Accounting.

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