Answer to Question #147459 in Finance for XYZ

Question

Q1) For a and b
- Define and identify the type of Income / Expenses
- Treatment of the Income / Expenses in the Profit and Loss account, Impact of the Income / Expenses in the Balance Sheet

a. You purchased 10 shares of L& T Company last year. On 5th March 2019, the company has declared a dividend Rs 50 per share. The income is earned but not yet collected in your account during this financial year.
b. On 5th March 2019, Mehta Brothers received 100% advance for goods, to be supplied in the next month. The Cost of the goods was Rs50000. They usually sells the goods at 10% mark up.

Answer 1

A.

The two accounts involved in transaction one is Dividend Income (as dividend is declared), the other one is Dividend Receivable (as it is not yet collected in the account)

Impact on the Income statement - Increase in Income - as Dividend Income --- $\$500$

Impact on the Balance Sheet - Increase in Current Assets - as Dividend Receivable --- $\$500$

B.

The accounts that are taken here are the Unearned Revenue and Cash.

Impact on the Income statement - No Impact ( Both cash and unearned revenue does not have a place in the Profit and loss account, both are balance sheet items)

Impact on the Balance Sheet - Increase in Cash - $\$55000$ ($\$50000+10\%\times 50000$ )

and Increase in Current Liabilities - Unearned Revenue - $\$55000$