1What is the accounting entity theory?
The activities of a business are separate from the actions of the owner. All transactions are recorded from the point of view of the business
2What is the formula for owner’s equity?
$Beginning \space Capital + Additional \space Contribution + Profit \space / - Loss - Drawings$
3What is the sample explanation for changes in owner’s equity?
The owner’s equity on date increased/decreased from XXXX to XXXX on date. This is due to the additional contributions of XXXX and profit for the year of XXXX, which is more/less than the drawings of XXXX.
4What is the journal entry for contribution of assets into a business?
Dr Asset Cr Capital
5What is the journal entry for withdrawal of assets into a business?
Dr Drawings Cr Asset
6What are the journal entries for profit and loss at the end of the year respectively?
Dr Income Summary Cr Capital & Dr Capital Cr Income Summary respectively
7What is the journal entry of transfer of drawings to capital account at the end of the year?
Dr Capital Cr Drawings
8What is dividends?
Profits distributed to the shareholders. It is the return on the shareholders’ interest in the business
9What is retained earnings?
Profits not distributed to the shareholders. It is the accumulation of the business’ past profits less dividends
10How to calculate amount of shares issued?
No. of shares x share price
11What is the journal entry for issuing of shares?
Dr CAB Cr Share Capital
12What is the journal entry for transferring profit / loss?
Profit: Dr Income Summary Cr Retained Earnings. Loss: Dr Retained Earnings Cr Income Summary
13What is the journal entry for dividends being declared?
Dr Dividends Cr CAB / Dividends Payable
14What is the journal entry for closing dividends account?
Dr Retained earnings Cr Dividends
15What are the 4 typical steps in a PLC’s equity over a year
1. Issuing shares 2. Declaring dividends 3. Transferring retained earnings to income summary 4. Deduct dvidends from retained earnings
16What is the equity entry in FS Position in PLC
Shareholder’s equity ; Share capital XXX Ordinary shares ; Retained earnings (Beginning balance +profit / - loss - dividends)