Answer to Question #252899 in Accounting for abi

Question

1.     On January 3, 2003, Ale Hab, an ex-manager of the CBE Bole Branch, established his own consultancy business. He named his business "AH Consultancy Services". The objective of the business is to render financial consultancy services to clients on a fee basis. Below are business activities occurred during the first month of operation of the firm (3 to 31 of January, 2003).

a.      Alemu deposited $20,000 cash in a bank account in the name of his business - AH Consultancy Services (Deposit slip # 1). He has $250,000 cash in his personal bank account with Dashen Bank and $50,000 cash in a safe deposit box at home. 

b.     Alemu transferred furniture worth $30,000 from his home for office uses by AH Consultancy Services (Asset receipt note #1). He also has extra home furniture, residential house and personal car worth $620,000, $800,000 and $360,000, respectively. 

Answer 1

Solution:

1.). a.). The journal entry is as follows:

Dr. Bank A/c                                                  20,000

                 Cr. Owners Contribution A/c                                     20,000

(Being owners’ contribution to the business)

 

b.). The journal entry is as follows:

Dr. Furniture A/c                                            30,000

              Cr. Drawings A/c                                                           30,000

(Being furniture transferred from home use to office use)