Exam Paper PCMN01T
Question 1:
Explain the fundamental accounting equation and illustrate with a simple example
including assets, liabilities, and equity.
Answer:
The fundamental accounting equation is:
Assets = Liabilities + Equity
This equation shows that a company’s resources (assets) are financed either through
borrowing (liabilities) or owners’ contributions/retained earnings (equity).
Example:
A business has cash of R50,000, owes R20,000 to suppliers, and the owner has invested
R30,000.
Assets = Liabilities + Equity
R50,000 = R20,000 + R30,000
This confirms the accounting equation is balanced.
Question 2:
Prepare journal entries for the following transactions:
a) Owner invests R100,000 cash in the business.
b) Purchased equipment for R25,000 cash.
c) Purchased inventory on credit for R15,000.
Answer:
a) Owner investment:
Dr Cash R100,000
Cr Capital/Owner’s Equity R100,000
b) Equipment purchase:
Dr Equipment R25,000
Cr Cash R25,000
c) Inventory purchased on credit:
Dr Inventory R15,000
Cr Accounts Payable R15,000
Question 3:
Prepare a trial balance from the following ledger balances:
, • Cash R50,000
• Accounts Receivable R10,000
• Inventory R20,000
• Equipment R30,000
• Accounts Payable R15,000
• Capital R95,000
Answer:
Account Debit (R) Credit (R)
Cash 50,000
Accounts Receivable 10,000
Inventory 20,000
Equipment 30,000
Accounts Payable 15,000
Capital 95,000
Total 110,000 110,000
The trial balance balances as total debits equal total credits.
Question 4:
Explain the process of preparing a basic income statement and provide a simple
example using:
• Sales R120,000
• Cost of goods sold R70,000
• Expenses R20,000
Answer:
An income statement calculates the profit or loss for a period by subtracting expenses
from revenue.
Income Statement Example:
Revenue (Sales): R120,000
Less: Cost of Goods Sold: R70,000
Question 1:
Explain the fundamental accounting equation and illustrate with a simple example
including assets, liabilities, and equity.
Answer:
The fundamental accounting equation is:
Assets = Liabilities + Equity
This equation shows that a company’s resources (assets) are financed either through
borrowing (liabilities) or owners’ contributions/retained earnings (equity).
Example:
A business has cash of R50,000, owes R20,000 to suppliers, and the owner has invested
R30,000.
Assets = Liabilities + Equity
R50,000 = R20,000 + R30,000
This confirms the accounting equation is balanced.
Question 2:
Prepare journal entries for the following transactions:
a) Owner invests R100,000 cash in the business.
b) Purchased equipment for R25,000 cash.
c) Purchased inventory on credit for R15,000.
Answer:
a) Owner investment:
Dr Cash R100,000
Cr Capital/Owner’s Equity R100,000
b) Equipment purchase:
Dr Equipment R25,000
Cr Cash R25,000
c) Inventory purchased on credit:
Dr Inventory R15,000
Cr Accounts Payable R15,000
Question 3:
Prepare a trial balance from the following ledger balances:
, • Cash R50,000
• Accounts Receivable R10,000
• Inventory R20,000
• Equipment R30,000
• Accounts Payable R15,000
• Capital R95,000
Answer:
Account Debit (R) Credit (R)
Cash 50,000
Accounts Receivable 10,000
Inventory 20,000
Equipment 30,000
Accounts Payable 15,000
Capital 95,000
Total 110,000 110,000
The trial balance balances as total debits equal total credits.
Question 4:
Explain the process of preparing a basic income statement and provide a simple
example using:
• Sales R120,000
• Cost of goods sold R70,000
• Expenses R20,000
Answer:
An income statement calculates the profit or loss for a period by subtracting expenses
from revenue.
Income Statement Example:
Revenue (Sales): R120,000
Less: Cost of Goods Sold: R70,000
