Alhaji Mohammed Garuba started business January 1, 1991 with a capital of N16,000

Alhaji Mohammed Garuba started business January 1, 1991 with a capital of N16,000. The following transactions were carried out during the month of January:

1. Purchased furniture by cash N2,400
2. Purchased stationery N200 cash
3. Purchased goods by cash N3,500
4. Purchased goods on credit from Mallam Nagogo N5,000
5. Sold goods for cash N6,000
6. Sold goods to Charlotte Umedo on credit N2,400
7. Paid advertisement expenses N200 cash
8. Paid Mallam Nagogo N3,500 cash being part of settlement of goods purchased
9. Paid rent in cash N300
10. Paid salaries and wages N600 cash.

Required: You are required to write up ledger Accounts recording the above transactions and extract a Trial Balance.

The correct answer and explanation is :

To address the accounting requirements for Alhaji Mohammed Garuba’s business operations in January 1991, we will systematically record each transaction in the appropriate ledger accounts and subsequently prepare a trial balance.

1. Journal Entries:

Each transaction is first recorded in the journal, adhering to the double-entry bookkeeping system, where every debit has a corresponding credit.

Date	Account Title	Debit (₦)	Credit (₦)
Jan 1	Cash (Capital)	16,000
	Owner’s Equity		16,000
Jan 5	Furniture	2,400
	Cash		2,400
Jan 7	Stationery	200
	Cash		200
Jan 10	Inventory	3,500
	Cash		3,500
Jan 12	Inventory	5,000
	Accounts Payable (Mallam Nagogo)		5,000
Jan 15	Cash	6,000
	Sales Revenue		6,000
Jan 18	Accounts Receivable (Charlotte Umedo)	2,400
	Sales Revenue		2,400
Jan 20	Advertisement Expense	200
	Cash		200
Jan 25	Accounts Payable (Mallam Nagogo)	3,500
	Cash		3,500
Jan 28	Rent Expense	300
	Cash		300
Jan 31	Salaries Expense	600
	Cash		600

2. Ledger Accounts:

After journalizing, transactions are posted to their respective ledger accounts.

• Cash Account:

Date	Description	Debit (₦)	Credit (₦)	Balance (₦)
Jan 1	Capital Introduction	16,000		16,000
Jan 5	Purchase of Furniture		2,400	13,600
Jan 7	Purchase of Stationery		200	13,400
Jan 10	Purchase of Goods		3,500	9,900
Jan 15	Sales Revenue	6,000		15,900
Jan 20	Advertisement Expense		200	15,700
Jan 25	Payment to Mallam Nagogo		3,500	12,200
Jan 28	Rent Expense		300	11,900
Jan 31	Salaries Expense		600	11,300

• Accounts Receivable:

Date	Description	Debit (₦)	Credit (₦)	Balance (₦)
Jan 18	Sales to Charlotte Umedo	2,400		2,400

• Accounts Payable (Mallam Nagogo):

Date	Description	Debit (₦)	Credit (₦)	Balance (₦)
Jan 12	Purchase on Credit		5,000	5,000
Jan 25	Payment Made	3,500		1,500

• Sales Revenue:

Date	Description	Debit (₦)	Credit (₦)	Balance (₦)
Jan 15	Cash Sales		6,000	6,000
Jan 18	Credit Sales to Charlotte Umedo		2,400	8,400

• Expenses Accounts:

Account	Debit (₦)	Credit (₦)	Balance (₦)
Advertisement Expense	200		200
Rent Expense	300		300
Salaries Expense	600		600

3. Trial Balance as of January 31, 1991:

A trial balance ensures that total debits equal total credits, verifying the arithmetic accuracy of the ledger postings.

Account Title	Debit (₦)	Credit (₦)
Cash	11,300
Accounts Receivable	2,400
Inventory	8,500
Furniture	2,400
Accounts Payable		1,500
Sales Revenue		8,400
Advertisement Expense	200
Rent Expense	300
Salaries Expense	600
Owner’s Equity		16,000
Total	25,200	25,200

Explanation:

The double-entry system mandates that every financial transaction affects at least two accounts, maintaining the balance between debits and credits. In the provided journal entries, each transaction is recorded with corresponding debits and credits. Posting these entries to the ledger accounts aggregates the individual impacts of each transaction. The trial balance, derived from these ledger balances, confirms that total debits equal total credits, ensuring the books are balanced and free from arithmetic errors.