Record the following transaction in the General Ledger. Indicate the effect on the accounting equation.

Here are the adjustments recorded in the General Ledger and their effect on the accounting equation:

Adjustment 1: No entry has been made for an invoice received from Phakathi Transporters, R180 was for the transport of goods purchased.

• General Ledger Entry:

  • Debit: Trading Stock R180
  • Credit: Accounts Payable R180

• Effect on Accounting Equation:

  • Assets (Trading Stock) increase by R180.
  • Liabilities (Accounts Payable) increase by R180.

Adjustment 2: No entries were made for stock sold on credit for R6 000. The mark-up on cost is 50%.

• General Ledger Entry (Sale):

  • Debit: Accounts Receivable R6 000
  • Credit: Sales R6 000

• Effect on Accounting Equation (Sale):

  • Assets (Accounts Receivable) increase by R6 000.
  • Equity (Sales, increasing profit) increases by R6 000.

• General Ledger Entry (Cost of Sale):

  • Cost of Sales = $\frac{\text{Sales}}{1 + \text{Mark-up percentage}} = \frac{\text{R}6\,000}{1 + 0.50} = \frac{\text{R}6\,000}{1.5} = \text{R}4\,000$
  • Debit: Cost of Sales R4 000
  • Credit: Trading Stock R4 000

• Effect on Accounting Equation (Cost of Sale):

  • Assets (Trading Stock) decrease by R4 000.
  • Equity (Cost of Sales, decreasing profit) decreases by R4 000.

Adjustment 3: After taking the above into account, a trading stock surplus of R1 800 was detected as per stock count on 28 February 2021.

• General Ledger Entry:

  • Debit: Trading Stock R1 800
  • Credit: Stock Surplus R1 800

• Effect on Accounting Equation:

  • Assets (Trading Stock) increase by R1 800.
  • Equity (Stock Surplus, increasing profit) increases by R1 800.

Adjustment 4: The physical stock count showed Packing material of R400.

• General Ledger Entry:

  • Packing material used = Initial balance - Physical count = R1 400 - R400 = R1 000
  • Debit: Packing Material Expense R1 000
  • Credit: Packing Material R1 000

• Effect on Accounting Equation:

  • Assets (Packing Material) decrease by R1 000.
  • Equity (Packing Material Expense, decreasing profit) decreases by R1 000.

Adjustment 5: Stationery of R1 900 was used during the year.

• General Ledger Entry:

  • Debit: Stationery Expense R1 900
  • Credit: Stationery R1 900

• Effect on Accounting Equation:

  • Assets (Stationery) decrease by R1 900.
  • Equity (Stationery Expense, decreasing profit) decreases by R1 900.