Typical Transaction 17
Example: Change interest rate from 5% to 10%
Typical Transaction 17 (TT17) is associated to Typical Transaction 12 (TT12).
Accounting procedure is as follows:
> First, apply change to 10% in TT12 to calculate the balance sheet for this transaction.
> Second, in TT12 click ‘’Apply at the Rate of ‘’ to TT17.
> Third in TT17 click ‘’Apply Change’’. Then the new balance Sheet will be shown.
> New interest rate is calculated as: 10% * bank balance = 10%*758,550 = 75,855.
> This amount is to be added to Bank and subtracted from Debtors and prepayments.
Accounting procedure is as follows:
> First, apply change to 10% in TT12 to calculate the balance sheet for this transaction.
> Second, in TT12 click ‘’Apply at the Rate of ‘’ to TT17.
> Third in TT17 click ‘’Apply Change’’. Then the new balance Sheet will be shown.
> New interest rate is calculated as: 10% * bank balance = 10%*758,550 = 75,855.
> This amount is to be added to Bank and subtracted from Debtors and prepayments.
The entries for this transaction in the Accounting System can be seen here, in the AccountingLab and in the Accounting System, Operation O38, Q2:
| Unearned Income Received | Increase in Bank (+) |
|---|---|
| Decrease in Debtors (-) |
> Enter new addition to Bank in field ‘’At the rate of’’: 10%
> Double entry: Debit entry Bank balance augments by 75,855 to 834,405
> Debtors balance diminishes by 75,855 from 85,155 down to 9,300
> Values in red show Balance Sheet values before and after changes
> Double entry: Debit entry Bank balance augments by 75,855 to 834,405
> Debtors balance diminishes by 75,855 from 85,155 down to 9,300
> Values in red show Balance Sheet values before and after changes
| Balance Sheet | |||
|---|---|---|---|
| Original | After Changes TT12 | After Changes TT17 | |
| Assets | |||
| Current Assets | 767,850 | 843,705 | 843,705 |
| Bank | 758,550 | 758,550 | 843,705 |
| Debtors and Prepayments | 9,300 | 85,155 | 9,300 |
| Other Current Assets (Stock) | 0 | 0 | 0 |
| Fixed Assets | 44,000 | 44,000 | 44,000 |
| TOTAL ASSETS | 811,850 | 887,705 | 887,705 |
| Liabilities | |||
| Current Liabilities | 44,300 | 44,300 | 44,300 |
| Creditors | 44,000 | 44,000 | 44,000 |
| Accruals | 300 | 300 | 300 |
| Long Term Liabilities | 0 | 0 | 0 |
| Long Term Loan | 0 | 0 | 0 |
| Equity | 767,550 | 843,405 | 843,405 |
| Shareholders’ Equity | 800,000 | 800,000 | |
| Income Statement | -32,450 | 43,405 | 43,405> |
| TOTAL Liabilities + Equity + Retained Earnings | 811,850 | 887,705 | 887,705 |