Practice Activity 2.3 Cash and credit financial transactions

Give two examples of financial transactions based on cash and credit.

Suggested answers to practice activity 2.3

Examples of financial transactions based on cash are:

1. Purchases of inventory amounting to ₦578,790 using cash.

2. Payment of rent by cheque of ₦120,080.

3. Purchase of equipment by cash for ₦1,220,390.

4. Payment of salaries by cheque of ₦270,890.

5. Payment of transport expenses by cash for ₦22,120.

6. Receipt of ₦100,000 cash from customers.

7. Receipt of ₦150,000 through the bank from customers.

Examples of financial transactions based on credit are:

1. Purchases of inventory amounting to ₦578,080 from Available Ltd. Cash will be paid in three months.

2. Sale of inventory worth ₦214,380 to Ready Retail Ltd. Ready Retail Ltd will pay the amount after a month.

3. Purchase of equipment for ₦122,480 from Furnit Ltd. The agreement is to pay the amount after two months.

4. Purchase of plant and machinery from Censit Ltd. The plant and machinery are worth ₦369,000.

5. Electricity bill of ₦5,000 is due by June 30, 2018. As at July 2, 2018, the business did not pay the bill.

6. Fuel expenses of ₦1,500 are expected to be paid by March 31, 2019. As at April 3, 2019, the business did not pay the amount.

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