Practice Activity 2.4 Identifying financial transactions

Mr. Emeka recently hired a bookkeeper to maintain the accounting records of Emeka Enterprises. The bookkeeper was formally introduced to the business on 1 April, 2017. Mr. Emeka provided the bookkeeper with a list of the following events that occurred in March, 2017. He told the bookkeeper that he just commenced business in March 2017.

The events are as follows:

i. On 1 March, 2017, Emeka took his sister, Adaobi, to purchase her West African Examination Council form to enable her write the upcoming Senior School Certificate Examinations (SSCE). The form was purchased for ₦4,500 and was paid from the bank account of Emeka.

ii. On 2 March, 2017, Emeka’s wife, Obioma, was taken to the hospital to be delivered of a set of twins. By 3 March, she was set to be discharged from the hospital. The hospital bill was ₦80,000. Emeka paid for the hospital bill in cash.

iii. Mr. Emeka introduced ₦400,000 cash into the business on 3 March, 2017. Mr. Emeka introduced ₦700,000 through the bank into the business on 3 March, 2017.

iv. On 11 March, 2017, Emeka hired a fine artist to train his daughter on the art of drawing. The fine artist was to be paid ₦50,000 at the end of every month.

v. On 12 March, 2017, the business buys inventory from the market for ₦107,000. This amount was paid by cash.

vi. On 14 March, 2017, Emeka donated the sum of ₦100,000 from his personal resources to a widow who was threatened with eviction notice by her landlord.

vii. The business sold inventory to Fill-up Enterprises on credit for ₦152,000 on 15 March, 2017; On the same date furniture amounting to ₦56,000 was purchased. Payment for the furniture was made using cash.

viii. On 18 March, 2017, Emeka paid the sum of ₦30,000 as wages to Mr. Ken who was hired as a coumpound gardener on 1 March, 2017. Mr. Ken works at the residence of Emeka.

ix. On 20 March, the business was supplied inventory from Kene Enterprises amounting to ₦110,000 by Supplier Enterprises and cash was not paid for the supply.

x. Fuel expenses of ₦15,200 was paid by cash on 31 March, 2017.

xi. On 31 March 2017, the owner’s uncle Mr. Give gave the business a loan of ₦50,000. The loan was given by cheque.

xii. Salary amounting to ₦20,000 was paid using cash to Emeka, the owner of the business on 31 March, 2017.

xiii. Electricity bill of ₦10,800 was paid by bank transfer on 31 March, 2017.

xiv.On 30 March, Fill-up Enterprises paid ₦100,000 through the bank account of Emeka Enterprises as part payment for their debt.

Required: Assume you are the Bookkeeper. Identify the financial transactions relating to Emeka Enterprises for March 2017.

Suggested answers to practice activity 2.4

The answers are based on the business entity concept. The concept is based on the premise that the transactions involving the business must be separated from the personal transactions of the sole proprietor or business owner.

The financial transactions relating to Emeka Enterprises for March 2017 are:

i. Mr. Emeka introduced ₦400,000 cash into the business on 3 March, 2017. Emeka introduced ₦700,000 through the bank into the business on 3 March, 2017.

ii. On 12 March, 2017, the business buys inventory from the market for ₦107,000. This amount was paid by cash.

iii. The business sold inventory to Fill-up Enterprises on credit for ₦152,000 on 15 March, 2017; On the same date furniture amounting to ₦56,000 was purchased. Payment for the furniture was made using cash.

iv. On 20 March, the business was supplied inventory from Kene Enterprises amounting to ₦110,000 by Supplier Enterprises and cash was not paid for the supply.

v. Fuel expenses of ₦15,200 was paid by cash on 31 March, 2017.

vi. On 31 March 2017, the owner’s uncle Mr. Give gave the business a loan of ₦50,000. The loan was given by cheque.

vii. Salary amounting to ₦20,000 was paid using cash to Emeka, the owner of the business on 31 March, 2017.

viii. Electricity bill of ₦10,800 was paid through bank transfer on 31 March, 2017.

ix. On 30 March, Fill-up Enterprises paid ₦100,000 through the bank account of Emeka Enterprises as part payment for their debt.