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1 BUSINESS ACCOUNTS 4th edition Question bank answers sourced from

2 Contents chapter answers number page

3 CHAPTER 1 What are Business Accounts? 1.1 asset of bank increases by 9,000 asset of cash increases by 1,000 capital increases by 10,000 assets 10,000 liabilities 0 = capital 10,000 asset of office equipment increases by 2,500 asset of bank decreases by 2,500 assets 10,000 liabilities 0 = capital 10,000 asset of bank increases by 2,000 liability of loan increases by 2,000 assets 12,000 liabilities 2,000 = capital 10,000 asset of factory machinery increases by 8,000 asset of bank decreases by 8,000 assets 12,000 liabilities 2,000 = capital 10,000 asset of office equipment increases by 2,000 liabilities of creditors increases by 2,000 assets 14,000 liabilities 4,000 = capital 10, (a) capital 10,000 (b) capital 12,500 (c) liabilities 6,250 (d) assets 17,030 (e) liabilities 5,425 (f) assets 24, (a) Owner started in business with capital of 8,000, comprising 7,000 in the bank and 1,000 in cash (b) Bought office equipment for 5,000, paying by cheque (c) Received a loan of 5,000 by cheque (d) Bought office equipment for 500, paying in cash (e) Bought machinery for 6,000, paying by cheque (f) Owner introduces 2,000 additional capital by cheque CHAPTER 2 Double-entry Book-keeping: First Principles 2.1 ANDREW KING (a) Dr Bank Account Cr Oct Capital 7,500 4 Oct Machinery 4, Oct T Richards: loan 1,500 6 Oct Office equipment 2, Oct Commission received Oct Rent paid Oct Wages Oct Drawings Oct Wages 450 (b) Dr Capital Account Cr Oct Bank 7,500 Dr Machinery Account Cr Oct Bank 4,000 Dr Office Equipment Account Cr Oct Bank 2,250 Dr Rent Paid Account Cr Oct Bank 400 Dr Tina Richards: Loan Account Cr Oct Bank 1,500 Dr Wages Account Cr Oct Bank Oct Bank 450 Dr Commission Received Account Cr Oct Bank 200 Dr Drawings Account Cr Oct Bank Jan Started in business with capital of 10,000 in the bank 2 Jan Bought office equipment for 3,000, paying by cheque 3 Jan Paid rates of 1,500, by cheque 4 Jan Commission received 500, by cheque 5 Jan Withdrew 250 cash from the bank 6 Jan Drawings 500, by cheque 7 Jan Received a bank loan 2,500, by cheque 8 Jan Bought a van for 7,500, paying by cheque 2 Note: the name of the other account in the double-entry accounts is shown in italics

4 CHAPTER 3 Double-entry Book-keeping: Further Transactions Dr Gordano Giftware Cr 3.1 Dr Bank Account Cr 1 May Capital 7,500 3 May Purchases 1,000 4 May Sales May Shop fittings 2, May Sales May Rent paid May Gordano Giftware 1, May Wages 1, May Bristol Supplies Ltd 1, May Rent paid May Sales 1, May Sales returns May Bank 1,250 Dr Purchases Returns Account Cr 14 May Bristol Supplies Ltd 150 Dr Capital Account Cr 1 May Bank 7,500 Dr Purchases Account Cr 3 May Bank 1,000 7 May Bristol Supplies Ltd 1,250 Dr Wages Account Cr 16 May Bank 1,500 Dr Sales Returns Account Cr 21 May Gordano Giftware 250 Dr Sales Account Cr May Bank May Gordano Giftware 1, May Bank 550 Dr Shop Fittings Account Cr 6 May Bank 2,000 Dr Bristol Supplies Limited Cr Transaction Account debited Account credited (a) purchases Armscott Limited (b) Orion Limited sales (c) carriage outwards bank (d) office equipment Office Products Limited (e) Armscott Limited purchases returns (f) sales returns Orion Limited (g) Armscott Limited bank (h) bank Orion Limited 14 May Purchases returns May Purchases 1, May Bank 1,100 Dr Rent Paid Account Cr 10 May Bank May Bank 750 3

5 CHAPTER 4 Business Documents 4.1 (a) F Ramsey & Son (b) 12 Jul: goods sold on credit by F Ramsey & Son to W Hoddle Ltd 14 Jul: payment received by F Ramsey & Son from W Hoddle Ltd, including cash discount allowed to W Hoddle Ltd 20 Jul: goods returned by W Hoddle Ltd to F Ramsey & Son; credit note no 864 issued by F Ramsey & Son (c) 54 (d) as a creditor (e) Dr W Hoddle Ltd Cr Jul Balance b/d Jul Cash/discount allowed Jul Sales Jul Sales (i) total trade discount net total VAT invoice total (a) (b) (c) none (d) 8, , , , , CHAPTER 5 Balancing Accounts the Trial Balance 5.1 (a) Dr Bank Account Cr Feb Capital Feb Purchases Feb Sales Feb Rent paid Feb Sales Feb Advertising Feb Drawings Feb Balance c/d 705 1,030 1,030 1 Mar Balance b/d Mar Purchases Mar J Lock: loan Mar Rent paid Mar Sales Mar Drawings Mar Sales Mar Advertising Mar Balance c/d 1,410 1,665 1,665 1 Apr Balance b/d 1,410 (b) Dr Capital Account Cr Mar Balance c/d Feb Bank Apr Balance b/d 500 (ii) net total cash total after VAT invoice total* discount cash discount (a) (b) (c) Dr Purchases Account Cr Feb Bank Mar Balance c/d Mar Bank Apr Balance b/d 250 (d) 6, , , , VAT is added to the total before deduction of cash discount. Dr Rent Paid Account Cr Feb Bank Mar Balance c/d Mar Bank Apr Balance b/d 100 4

6 Dr Sales Account Cr Mar Balance c/d 1, Feb Bank Feb Bank Mar Bank Mar Bank 180 1,040 1,040 1 Apr Balance b/d 1,040 Dr Advertising Account Cr (c) Trial balance of A Thompson as at 31 March 20-0 Dr Cr Bank 1,410 Capital 500 Purchases 250 Rent paid 100 Sales 1,040 Advertising 55 Drawings 175 J Lock: loan 450 1,990 1, Feb Bank Mar Balance c/d Mar Bank Apr Balance b/d 55 Dr Drawings Account Cr Feb Bank Mar Balance c/d Mar Bank Apr Balance b/d 175 Dr J Lock: Loan Account Cr Mar Balance c/d Mar Bank (a) 3 Feb Celia Donithorn receives a cheque for 190 from Georgina Harrison, and allows her cash discount of 10 6 Feb Celia Donithorn sells goods 80, on credit to Georgina Harrison 10 Feb Georgina Harrison returns goods 15 to Celia Donithorn, who issues a credit note (b) 10 on 200 = 5% (c) Georgina Harrison owes Celia Donithorn (a) (i) M Johnston is a debtor of Devenish Interiors: the balance of 150 is brought down from the previous month. (ii) J Kelly is a creditor of Devenish Interiors: the balance of 220 is brought down from the previous month. (b) M Johnston. (c) M Johnston has returned goods 10 to Devenish Interiors, who have issued a credit note. (d) Devenish Interiors have paid for the purchases made on 6 April from J Kelly: the amount of the cheque was 105, and Devenish Interiors have received 5 discount from J Kelly for quick settlement. (e) Credit note. 1 Apr Balance b/d 450 5

7 CHAPTER 6 Division of the Ledger Primary Accounting Records 6.1 Purchases Day Book Date Details Invoice Folio Net VAT Gross Jan T F Day Jan B G Moon 1, , Jan D S Cox Jan T F Day 1, , Jan B G Moon Jan T F Day Jan D S Cox 1, , Jan Totals for month 5, , PURCHASES LEDGER Dr T F Day Cr 31 Jan Balance c/d 2, Jan Purchases Jan Purchases 1, Jan Purchases , , Feb Balance b/d 2, Dr B G Moon Cr 31 Jan Balance c/d 1, Jan Purchases 1, Jan Purchases , , Feb Balance b/d 1, Dr D S Cox Cr 31 Jan Balance c/d 1, Jan Purchases Jan Purchases 1, , , GENERAL LEDGER 1 Feb Balance b/d 1, Dr Purchases Account Cr 31 Jan Purchases Day Book 5, PURCHASES LEDGER Dr C Hills Cr Dec Bank Dec Balance b/d Dec Balance c/d Dec Purchases Dec Purchases Jan Balance b/d 275 Dr L Howe Cr Dec Balance c/d Dec Balance b/d Dec Purchases Jan Balance b/d 341 SALES LEDGER Dr K Harris Cr Dec Balance b/d Dec Bank Dec Sales Dec Balance c/d Dec Sales Jan Balance b/d 88 GENERAL LEDGER Dr Bank Account Cr Dec Balance b/d Dec C Hills Dec K Harris Dec Printing expenses Dec Balance c/d 1,160 1,334 1, Jan Balance b/d 1,160 Dr Printing Expenses Account Cr Dec Bank 20 Dr Capital Account Cr Dec Balance b/d 641 6

8 Dr Purchases Account Cr Dec Purchases Day Book 310 Dr Sales Account Cr Dec Sales Day Book 320 Dr Value Added Tax Account Cr Dec Purchases Day Book Dec Sales Day Book Dec Balance c/d Jan Balance b/d 1 Trial balance of C Emberson as at 31 December 20-8 Dr Cr Name of account C Hills 275 L Howe 341 K Harris 88 Bank 1,160 Printing expenses 20 Capital 641 Purchases 310 Sales 320 Value Added Tax 1 1,578 1,578 CHAPTER 7 Value Added Tax 7.1 (a) VAT amounts: Month Purchases Expenses Fixed assets Sales 20-5 October 1, ,560 November 1, ,800 December 1, ,120 (b) Dr Value Added Tax Account Cr Oct Purchases Day Book 1, Oct Sales Day Book 2,560 Expenses Nov Sales Day Book 2,800 Fixed assets Dec Sales Day Book 3, Nov Purchases Day Book 1,520 Expenses Dec Purchases Day Book 1,680 Expenses Dec Balance c/d 1,616 8,480 8, Jan Balance b/d 1,414 (c) VAT account has a credit balance of 1,616; this means that Trix Traders Limited owes the amount to HM Revenue & Customs. The amount is payable not later than 31 January The book-keeping entries for payment will be debit Value Added Tax Account credit bank account If Trix Traders Limited prepares a balance sheet at 31 December 20-5, the amount owing to HM Revenue & Customs will be shown as a creditor. 7.2 (a) Purchases Day Book Date Details Invoice Folio Net VAT Gross No Jun Paper Supplies Ltd Jun Severn Traders Jun Computer Services Ltd X Jun Paper Supplies Ltd Jun Totals for week 1, ,

9 Sales Day Book Date Details Invoice Folio Net VAT Gross No Jun Wyvern Publishing Jun House of Cards Ltd Jun Lennox Publishers Jun House of Cards Ltd Jun Wyvern Publishing Jun Totals for week 2, , Dr House of Cards Limited Cr 12 Jun Sales Jun Sales Dr Lennox Publishers Cr 13 Jun Sales (b) PURCHASES LEDGER Dr Paper Supplies Limited Cr 10 Jun Purchases Jun Purchases Dr Severn Traders Limited Cr 11 Jun Purchases Dr Computer Services Limited Cr 12 Jun Purchases GENERAL LEDGER Dr Purchases Account Cr 14 Jun Purchases Day Book 1, Dr Sales Account Cr 14 Jun Sales Day Book 2, Dr Value Added Tax Account Cr 14 Jun Purchases Day Book Jun Sales Day Book Jun Balance c/d Jun Balance b/d SALES LEDGER Dr Wyvern Publishing Cr 10 Jun Sales Jun Sales VAT account has a credit balance of ; this means that Priory Printers owes the amount to HM Revenue & Customs. The amount will be paid at the end of the VAT quarter together with other VAT collected from sales, less VAT charged on purchases, expenses and fixed assets. 8

10 CHAPTER 8 Cash Book 8.1 (a) Any three from: bank giro credit direct debit standing order exchange for other goods/services pass on debt to a creditor Dr Cash Book Cr Date Details Folio Disc Cash Bank Date Details Folio Disc Cash Bank Jul Balances b/d 419 3,685 6 Jul Wages Jul A Wood Jul C Hill Jul Sales Jul T Jarvis 28 1, Jul Atlas & Co Jul Wages Jul Bank C Jul Postages Jul T Phillips Jul Wages Jul Cash C Jul Cash C Jul W Moore Jul Wages Jul Bank C Jul Balances c/d 71 3, , ,058 1 Aug Balances b/d 71 3,195 CHAPTER 9 Petty Cash Book 9.1 Petty Cash Book Receipts Date Details Voucher Total Analysis columns No Payment Postages Travel Stationery Wages Misc Ledger Feb Balance b/d Feb Cash received 3 Feb Postage Feb Travelling exp Feb Cleaner's wages Feb Stationery Feb Postage Feb Travelling exp Feb Cleaner's wages Feb Stationery Feb T B Collins Feb Miscellaneous Feb Postage Feb Cleaner's wages Cash Book (credit side only) Discount Cash Bank 2 Jan Balance b/d 380 (...) B 4 Jan M Hughes 30 (...) C 570 (...) K 9 Jan Bank 240 (...) H 16 Jan Motor van 5,850 (...) I 20 Jan Purchases 735 (...) A 31 Jan Balances c/d 25 (...) L 260 (...) F 30 1,000 7, Feb Balance c/d Mar Balance b/d Mar Cash received 9

11 9.2 Petty Cash Book CHAPTER 10 Bank Reconciliation Statements Receipts Date Details Voucher Total Analysis columns No Payment Postages Travel Motor Van Stationery Misc Ledger exps exps exps Nov Balance b/d Nov Cash received 4 Nov Postage stamps Nov Train fare Dr Cash Book (bank columns) Cr May Balance b/d 4,200 2 May Cheque no May Sales 1,414 7 May Cheque no May Sales 1, May Cheque no May Sales 1, May National Insurance Co May Bank service charges May Balance c/d 7,076 8,014 8,014 1 Jun Balance b/d 7,076 9 Nov Petrol Nov Stationery Nov Bus fares Nov P Gates Nov Postage stamps Nov Motor van repairs Nov Stationery Nov Petrol Nov Misc expenses Nov Parcel post ANDREW CLARK Bank Reconciliation Statement as at 31 May 20-0 Balance at bank as per cash book 7,076 Add: cheque drawn (no 424), not yet recorded on the bank statement 214 7,290 Less: amount paid in, not yet recorded on the bank statement 1,160 Balance at bank as per bank statement 6, Nov Travelling Nov Balance c/d Dec Balance b/d Dec Cash received 10.2 (a) Dr Cash Book (bank columns) Cr May Balance b/d* May Mortgage standing order May Bank charges May Balance c/d Jun Balance b/d 166 * Total of debt entries total of credit entries, ie =

12 (b) C COD Bank Reconciliation Statement as at 31 May 20-9 Balance at bank as per cash book 166 Add: cheque drawn, not yet recorded on the bank statement N Fish Less: amounts paid in, not yet recorded on the bank statement V Perch 90 B Tench Balance at bank as per bank statement (a) Balance of statement at 1 October ,000 Less: payment credited on statement on 5 October 220 discount received Balance of account at 1 October (b) Balance of account at 31 October Add: payment made on 30 October 1,235 discount received 65 1,300 Balance of statement at 31 October , (a) Dr Cash Book (bank columns) Cr Nov Bank giro credit Nov Balance b/d Nov Deposit account interest 84 9 Nov Direct debit Nov Balance c/d Nov Loan interest Dec Balance b/d 285 (b) KIRSTY McDONALD Bank Reconciliation Statement as at 30 November 20-0 Balance at bank as per cash book (285) Add: cheques drawn, not yet recorded on the bank statement cheque no cheque no cheque no Less: amounts paid in, not yet recorded on the bank statement A Palmer 29 J Dixon Balance at bank as per bank statement

13 CHAPTER 12 Final Accounts BALANCE SHEET AS AT 30 APRIL (a) (i) (ii) TRIAL BALANCE FINAL ACCOUNTS Debit Credit Trading Profit/Loss Balance Sheet 1. Rent paid 2. Van 3. Sales 4. Creditors 5. Purchases 6. Capital 7. Salaries (b) closing stock Fixed Assets Shop fittings 13,000 Current Assets Stock 4,400 Debtors 120 Bank 610 Cash 100 5,230 Less Current Liabilities Creditors 2,030 Working Capital 3,200 NET ASSETS 16, JANE WALSH TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 APRIL 20-0 Sales 30,000 Opening stock 4,700 Purchases 15,700 20,400 Less Closing stock 4,400 Cost of Goods Sold 16,000 Gross profit 14,000 Less expenses: Shop wages* 4,420 Light and heat 260 Rent 4,500 Insurance 120 9,300 Net profit 4,700 FINANCED BY Capital Opening capital 15,000 Add Net profit 4,700 19,700 Less Drawings 3,500 16,200 * Shop wages could, alternatively, be shown as trading account expense. 12

14 CHAPTER 13 Accruals and Prepayments 13.1 JANE OSMAN TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 20-2 Sales 60,800 Less Sales returns 800 Net sales 60,000 Opening stock 9,400 Purchases 31,400 40,800 Less Closing Stock 8,800 Cost of Goods Sold 32,000 Gross profit 28,000 Less expenses: Shop wages* 8, ,200 Light and heat 520 Rent 8,500 Insurance ,400 Net profit 9,600 * Shop wages could, alternatively, be shown as a trading account expense. BALANCE SHEET AS AT 31 MARCH 20-2 Fixed Assets Shop fittings 26,000 Current Assets Stock 8,800 Debtors 230 Prepayment 60 Bank 1,220 Cash ,500 Less Current Liabilities Creditors 4,550 Accrual 350 4,900 Working Capital 5,600 NET ASSETS 31,600 FINANCED BY Capital Opening capital 29,000 Add Net profit 9,600 38,600 Less Drawings 7,000 31, PROFIT AND LOSS ACCOUNT OF SANDRA BLACK FOR THE YEAR ENDED 31 MAY 20-0 Income from clients 32,500 Commissions from other sources 800 Discount received ,450 Less expenses: Stationery 2, ,950 Wages 7,600 Rent and rates 2, ,230 Vehicle expenses 2,000 Light and heat Insurance 850 Telephone Sundry expenses ,982 Net profit 17,468 BALANCE SHEET OF SANDRA BLACK AS AT 31 MAY 20-0 Fixed Assets Equipment 4,500 Vehicles 6,500 11,000 Current Assets Stock 150 Debtors 760 Prepayment 120 Cash 175 1,205 Less Current Liabilities Creditors 670 Accruals Bank overdraft 250 1,017 Working Capital 188 NET ASSETS 11,188 FINANCED BY Capital Opening capital 4,920 Add Net profit 17,468 22,388 Less Drawings 11,200 11,188 13

15 13.3 (a) Dr Rates Account Cr 20-1/ /-2 31 Jan Balance b/d Jan Profit and loss account Jan Balance c/d / /-3 1 Feb Balance b/d 100 Dr Rent Receivable Account Cr 20-1/ /-2 31 Jan Profit and loss account Jan Balance b/d Jan Balance c/d / /-3 1 Feb Balance b/d 75 Dr Insurance Account Cr 20-1/ /-2 31 Jan Balance b/d Jan Drawings Jan Profit and loss account Dr Wages Account Cr 20-1/ /-2 31 Jan Balance b/d 5, Jan Profit and loss account 5, Jan Balance c/d 300 5,500 5, / /-3 1 Feb Balance b/d 300 BALANCE SHEET OF BILTON POTTERIES AS AT 31 JANUARY 20-2 Fixed Assets Premises 5,000 Current Assets Stock 1,000 Debtors 434 Prepayment 100 Debtor for rent 75 Bank 3,218 4,827 Less Current Liabilities Creditors 870 Accrual 300 1,170 Working Capital 3,657 NET ASSETS 8,657 FINANCED BY Capital Opening capital 7,000 Add Net profit 5,507 12,507 Less Drawings 3, ,850 8,657 (b) PROFIT AND LOSS ACCOUNT OF BILTON POTTERIES FOR THE YEAR ENDED 31 JANUARY 20-2 Gross profit 11,507 Add Rent receivable ,807 Less expenses: Insurance 400 Rates 400 Wages 5,500 6,300 Net profit 5,507 14

16 13.4 (i) Dr Rent Payable Account Cr 20-1/ /-2 1 Aug Bank Jul Profit and loss account 2,400 4 Nov Bank Mar Bank Jul Balance c/d 600 2,400 2, / /-3 8 Aug Bank Aug Balance b/d 600 (ii) BALANCE SHEET (EXTRACT) AS AT 31 JULY 20-2 Current Assets Prepayment: rates 90 Current Liabilities Accruals: rent payable 600 electricity 420 Dr Rates Account Cr 20-1/ /-2 31 Aug Bank Jul Profit and loss account Oct Bank Jul Balance c/d Apr Bank / /-3 1 Aug Balance b/d 90 Dr Electricity Account Cr 20-1/ /-2 17 Oct Bank Jul Profit and loss account 1, Jan Bank Apr Bank Jul Balance c/d 420 1,480 1, / /-3 1 Aug Balance b/d

17 CHAPTER 14 Depreciation of Fixed Assets 14.1 (a) (i) Straight-line method Dr Provision for Depreciation Account Machinery Cr Dec Balance c/d 1, Dec Profit and loss account 1, Dec Balance c/d 2,000 1 Jan Balance b/d 1, Dec Profit and loss account 1,000 2,000 2, Jan Balance b/d 2,000 (ii) Reducing balance method Dr Provision for Depreciation Account Machinery Cr Dec Balance c/d 1, Dec Profit and loss account 1, Dec Balance c/d 2,220 1 Jan Balance b/d 1, Dec Profit and loss account 1,020 2,220 2, Jan Balance b/d 2,220 (b) BALANCE SHEET (EXTRACT) AS AT 31 DECEMBER 20-7 Fixed Assets Cost Dep'n to date Net Machinery 8,000 1,200 6, PAULO GAVINCI TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 APRIL 20-0 Sales 300,000 Opening stock 2,000 Purchases 190,250 Less Purchases returns 400 Less Goods for own use 250 Net purchases 189, ,600 Less Closing stock 1,600 Cost of Goods Sold 190,000 Gross profit 110,000 Less expenses: Wages* 45, ,000 46,000 Rent 31,800 2,000 29,800 General expenses 17,200 Provision for depreciation: fixtures and fittings 19,000 delivery vehicle 2, ,000 Net loss (4,000) * Wages could, alternatively, be shown as a trading account expense. As it is a restaurant, the cost of wages is closely related to sales and purchases. BALANCE SHEET (EXTRACT) AS AT 31 DECEMBER 20-8 Fixed Assets Cost Dep'n to date Net Machinery 8,000 2,220 5,780 16

18 BALANCE SHEET AS AT 30 APRIL 20-0 Fixed Assets Cost Dep'n to date Net Fixtures and fittings 95,000 19,000 76,000 Delivery vehicle 8,000 2,000 6, ,000 21,000 82,000 Current Assets Stock 1,600 Prepayment 2,000 Cash 450 4,050 Less Current Liabilities Creditors 5,000 Accrual 1,000 Bank overdraft 4,300 10,300 Working Capital (6,250) 75,750 Less Long-term Liabilities Bank loan 30,000 NET ASSETS 45,750 Dr Provision for Depreciation Account Vehicles Cr Jun Disposals account 14,640 1 Jan Balance b/d* 43, Dec Balance c/d 45, Dec Profit and loss account 15,744 59,664 59, Jan Balance b/d 45,024 Cost Dep'n 20-5 Dep'n 20-6 Dep'n 20-7 Dep'n 20-8 Transit van 1 30,000 6,000 4,800 3,840 sold Transit van 2 30,000 6,000 4,800 3,840 3,072 Transit van 3 30,000 6,000 4,800 3,840 3,072 Transit van 4 48, ,600 18,000 14,400 11,520 15,744 * Provision for depreciation at 1 January 20-8: 18, , ,520 = 43,920 Transfer to disposals account on 30 June 20-8: 6, , ,840 = 14,640 FINANCED BY Capital Opening capital 75,000 Less Net loss 4,000 71,000 Less Drawings 25,000 Goods for own use ,250 45, Dr Vehicles Account Cr Jan Balance b/d 90, Jun Disposals account 30,000 1 Jan Bank 48, Dec Balance c/d 108, , , Jan Balance b/d 108,000 Dr Disposal of Motor Vehicles Account Cr Jun Vehicles 30, Jun Provision for dep'n account 14, Jun Bank 10, Dec Profit and loss account (loss on sale) 5,360 30,000 30, A The owner has introduced 30,000 of additional capital, which has been paid into the bank account. B 4,000 of stock has been purchased on credit. C Property has been purchased (or improvements made to property) costing 50,000; financed by a bank loan. D Stock which originally cost 5,000 has been sold on credit for 7,000; profit of 2,000 made. E 3,000 cash withdrawn from the bank for use in the business. F Accrued expense of 10,000 paid by cheque. G A motor van (or vans) which had cost 3,000 has been sold for 4,000 a cheque received for this amount. The profit on sale of 1,000 has been credited to capital account. H A creditor for 6,000 has been paid, 5,000 by cheque and 1,000 discount received. I A loan repayment of 1,000 has been made by cheque. J A debtor (or debtors) has paid 7,000 by cheque. 17

19 CHAPTER 15 Bad Debts and Provision for Bad Debts 15.1 PAULA JONES TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 20-0 Sales 168,000 Less Sales returns 1,000 Net sales 167,000 Opening stock 6,400 Purchases 96,000 Carriage inwards 400 Net purchases 96, ,800 Less Closing stock 6,800 Cost of Goods Sold 96,000 Gross profit 71,000 Discount received ,250 Less expenses: Discount allowed 380 Rates 4, ,800 Insurance 1,200 Wages and salaries* 22, ,000 23,000 Bad debt written off 120 Provision for depreciation: fixtures 2,000 30,500 Net profit 40,750 * Wages and salaries could, alternatively, be shown as a trading account expense. BALANCE SHEET AS AT 31 MARCH 20-0 Fixed Assets Cost Dep'n to date Net Premises 187, ,000 Fixtures and fittings 20,000 8,000 12, ,000 8, ,000 Current Assets Stock 6,800 Debtors 5,880 Prepayment 600 Cash ,380 Less Current Liabilities Creditors 4,000 Accrual 1,000 Bank overdraft 4,630 9,630 Working Capital 3,750 NET ASSETS 202,750 FINANCED BY Capital Opening capital 200,000 Add Net profit 40, ,750 Less Drawings 38, , SANDRA SHENSTONE TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 20-5 Sales 26,700 Less Sales returns 340 Net sales 26,360 Opening stock 2,930 Purchases 12,830 15,760 Less Closing stock 3,160 Cost of Goods Sold 12,600 Gross profit 13,760 Discount received ,100 Less expenses: Wages and salaries 6,800 Discount allowed 260 Rent 2,600 Bad debts written off 420 Van running expenses 780 Rates and insurance 760 General office expenses 320 Provision for depreciation: delivery van 600 office furniture and equipment 400 Provision for bad debts 93 13,033 Net profit 1,067 BALANCE SHEET AS AT 30 JUNE 20-5 Fixed Assets Cost Dep'n to date Net Delivery van 1, ,200 Office furniture and equipment 1, ,200 3,400 1,000 2,400 Current Assets Stock 3,160 Debtors 4,650 Less Provision for bad debts 93 4,557 Cash 50 7,767 Less Current Liabilities Creditors 2,950 Bank overdraft 2,200 5,150 Working Capital 2,617 NET ASSETS 5,017 FINANCED BY Capital Opening capital 6,400 Add Net profit 1,067 7,467 Less Drawings 2,450 5,017 18

20 15.3 STAMPER TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 20-9 Sales 150,750 Opening stock 25,600 Purchases 112, , ,950 Less Closing stock 27,350 Cost of Goods Sold 110,600 Gross profit 40,150 Less expenses: Wages 12,610 Rent 2, ,000 Motor expenses 1, ,380 Provision for depreciation: motor vehicle 3,000 equipment 3,150 Bad debt written off 200 Insurance 1, ,450 23,790 Net profit 16,360 BALANCE SHEET AS AT 31 DECEMBER 20-9 Fixed Assets Cost Dep'n to date Net Motor vehicle 17,000 6,000 11,000 Equipment 15,000 7,650 7,350 32,000 13,650 18,350 Current Assets Stock 27,350 Debtors 9,750 Prepayment 500 Bank 900 Cash ,750 Less Current Liabilities Creditors 8,100 Accrual 140 8,240 Working Capital 30,510 NET ASSETS 48,860 FINANCED BY Capital Opening capital 52,500 Add Net profit 16,360 68,860 Less Drawings 20,000 48, PERCIVAL PORTEOUS TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MAY 20-0 Sales 145,185 Less Sales returns 780 Net sales 144,405 Opening stock 11,100 Purchases 102,000 Carriage in 2,190 Less Purchases returns 1,440 Net purchases 102, ,850 Less Closing stock 12,600 Cost of Goods Sold 101,250 Gross profit 43,155 Rent receivable ,115 Less expenses: Salaries 5, ,800 7,080 Carriage outwards 2,340 Rates and insurance 2, ,480 Advertising 1,041 Bad debts written off 240 Increase in provision for bad debts Provision for depreciation: office equipment 600 shop fittings ,516 Net profit 29,599 BALANCE SHEET AS AT 31 MAY 20-0 Fixed Assets Cost Dep'n to date Net Premises 54,000-54,000 Office equipment 6,000 1,800 4,200 Shop fittings 18,000 5,460 12,540 78,000 7,260 70,740 Current Assets Stock 12,600 Debtors 7,500 Less Provision for bad debts 375 7,125 Prepayments 310 Cash 1,020 21,055 Less Current Liabilities Creditors 6,228 Accruals 1,800 Bank overdraft 7,488 15,516 Working Capital 5,539 NET ASSETS 76,279 FINANCED BY Capital Opening capital 54,960 Add Net profit 29,599 84,559 Less Drawings 8,280 76,279

21 CHAPTER 16 The Extended Trial Balance

22 CHAPTER 17 The Regulatory Framework of Accounting 17.1 (i) FIFO Date Receipts Issues Balance 20-1/-2 Quantity Price Quantity Price Quantity Price Total June x 6.00 = 4,800 July x 6.00 = 600 September x 6.00 = 600 1,200 x 7.00 = 8,400 1,300 9,000 December x 7.00 = 4, February x 7.00 = 4,900 1,000 x 8.00 = 8,000 1,700 12,900 April x 7.00 = 2,100 1,000 x 8.00 = 8,000 1,300 10,100 May x 7.00 = 2,100 1,000 x 8.00 = 8, x = 7,000 2,000 17,100 (ii) LIFO Date Receipts Issues Balance 20-1/-2 Quantity Price Quantity Price Quantity Price Total June x 6.00 = 4,800 July x 6.00 = 600 September x 6.00 = 600 1,200 x 7.00 = 8,400 1,300 9,000 December x 6.00 = x 7.00 = 4, ,800 February x 6.00 = x 7.00 = 4,200 1,000 x 8.00 = 8,000 1,700 12,800 April x 6.00 = x 7.00 = 4, x 8.00 = 4,800 1,300 9,600 May x 6.00 = x 7.00 = 4, x 8.00 = 4, x = 7,000 2,000 16, (a) LIFO Date Receipts Issues Balance 20-9 Quantity Price Quantity Price Quantity Price Total 1 Sep Balance b/d NIL 3 Sep x 1.00 = Sep x 1.00 = Sep x 1.00 = x 1.50 = Sep x 1.00 = x 1.50 = Sep x 1.00 = x 1.50 = x 2.00 = Sep x 1.00 = x 1.50 = x 2.00 =

23 AVCO Date Receipts Issues Balance 20-9 Quantity Price Quantity Price Quantity Price Total 1 Sep Balance b/d NIL 3 Sep x 1.00 = Sep x 1.00 = Sep x 1.00 = x 1.50 = x 1.46 = Sep x 1.46 = Sep x 1.46 = x 2.00 = x 1.85 = Sep x 1.85 = (b) In times of rising prices, LIFO produces lower profits than AVCO. This is because, under LIFO the latest prices are charged to cost of goods sold, whereas under AVCO prices charged to cost of sales are smoothed and are lower than AVCO. In times of falling prices, the reverse will apply Item DW/04 STOCK CARD Date Details Receipts Issues Balance Units Units Units Sep Balance Sep Issue note no A Sep Invoice no Sep Invoice no Sep Issue note no D Sep Invoice no Sep Issue note no B Sep Stock loss Note: A stock loss of two units has occurred during the month. This will have been caused by: short delivery, ie incorrect number of units received, two units short, or over-issue, ie incorrect number of units issued, two units extra, or theft, if continued stock losses are detected, the matter will need further investigation CHAPTER 18 The Journal 18.1 Date Details Folio Dr Cr May Freehold premises account GL 45,000 Fixtures and fittings account GL 12,500 Motor vehicles account GL 9,500 Bank account CB 2,800 Cash account CB 650 Stock account GL 1,320 F Hardy SL 160 A Darby PL 270 Capital account* GL 66,060 69,130 69,130 Assets and liabilities on 1 May 20-0 * balancing figure, ie assets minus liabilities 22

24 18.2 (a) Dr Vehicle Account Cr 20-5/ /-6 1 Nov Bank 12, Oct Balance c/d 12, / /-7 1 Nov Balance b/d 12,000 1 Jan Disposals account 12,000 6 Dec Bank 18, Oct Balance c/d 18,000 30,000 30, / /-8 1 Nov Balance b/d 18,000 7 Mar Disposals account 18,000 7 Mar Disposals account 13, Oct Balance c/d 28,000 (part-exchange allowance) 7 Mar Supatruks Ltd 14,500 (balance due) 46,000 46, / /-9 1 Nov Balance b/d 28,000 Dr Provision for Depreciation Account - Vehicle Cr 20-5/ /-6 31 Oct Balance c/d 3, Oct Profit and loss account 3, / /-7 1 Jan Disposals account 3,000 1 Nov Balance b/d 3, Oct Balance c/d 4, Oct Profit and loss account 4,500 7,500 7, / /-8 7 Mar Disposals account 4,500 1 Nov Balance b/d 4, Oct Balance c/d 7, Oct Profit and loss account 7,000 11,500 11, / /-9 1 Nov Balance b/d 7,000 (b) Date Details Folio Dr Cr Jan Disposals account 12,000 Vehicle 12,000 Provision for depreciation vehicle 3,000 Disposals account 3,000 Bank 8,450 Disposals account 8,450 Profit and loss account 550 Disposals account ,000 24,000 Lorry, registration no... written off in accident. Insurance proceeds 8,450 received. Loss of 550 transferred to profit and loss account Mar Disposals account 18,000 Vehicle 18,000 Provision for depreciation vehicle 4,500 Disposals account 4,500 Vehicle 13,500 Disposals account 13,500 Vehicle 14,500 Supatruks Ltd 14,500 50,500 50,500 Purchase of new lorry, registration no..., for 28,000. Part-exchange allowance of 13,500 against lorry, registration no...; balance of 14,500 payable on 7 March BALANCE SHEET (EXTRACT) OF W E CARRYIT AS AT 31 OCTOBER 20-6 Fixed Assets Cost Dep'n to date Net Vehicle 12,000 3,000 9,000 BALANCE SHEET (EXTRACT) OF W E CARRYIT AS AT 31 OCTOBER 20-7 Fixed Assets Cost Dep'n to date Net Vehicle 18,000 4,500 13,500 BALANCE SHEET (EXTRACT) OF W E CARRYIT AS AT 31 OCTOBER 20-8 Fixed Assets Cost Dep'n to date Net Vehicle 28,000 7,000 21, CHAPTER 19 Correction of Errors 19.1 Dr Suspense Account Cr Forest and Co 70 Sales 70 Drystone Brothers 210 Trial balance difference (missing figure) 350 Clair and Sons Notes: (a) Debit suspense account 70; credit Forest and Co 70. (It is probably better to show this as two debits and two credits of 35 each.) (b) Debit suspense account 210; credit Drystone Brothers 210. (Instead of recording the difference, it is probably better in practice to take out the wrong amount of 700, and then put through a transaction for the correct amount for 910.) (c) Debit sales account 70; credit suspense account 70. (As the sales day book has been overcast, the error will have been taken into sales account.) (d) Debit suspense account 140; credit Clair and Sons 140. (As before, it is better in practice to take out the wrong amount, and then put through a transaction for the correct amount.)

25 19.2 (a) Date Details Folio Dr Cr Apr Sales account GL 700 Disposals account GL 700 Sale proceeds of van credited in error to sales account 30 Apr Discount allowed account GL 800 Suspense account GL 800 Discount allowed entered in error as a credit balance to the trial balance 30 Apr Sundry debtors SL 500 Suspense account GL 500 Debtors omitted in error from the trial balance 19.3 (i) Date Details Folio Dr Cr Year Sep Returns inwards account GL 124 Suspense account GL 124 Returns outwards account GL 124 Suspense account GL 124 Goods returned by F Mortimer entered in error to returns outwards account 30 Sep L Johnson SL 47 General expenses account GL 47 Dishonoured cheque from L Johnson for 47 debited in error to general expenses account 30 Sep Drawings GL 225 Goods for own use account GL 225 (or purchases account could be used) Goods, value 225 at cost, taken by Trent for personal use (b) Dr Suspense Account Cr Apr Trial balance difference 1, Apr Discount allowed Apr Sundry debtors 500 1,300 1, Sep Sales account GL 850 Suspense account GL 850 Trade in allowance on motor van debited in error to sales account 30 Sep Computer expenses account GL 45 Computer account GL 45 Date Details Folio Dr Cr Apr Profit and loss account 500 Provision for bad debts account GL 500 Creation of a provision for bad debts 30 Apr Bad debts written off account GL 250 S Joseph SL 250 Bad debt written off 24 Payment of 45 for servicing of computer debited in error to computer account (ii) Dr Suspense Account Cr Year 12 Year Sep Trial balance difference 1, Sep Returns inwards account Sep Returns outwards account Sep Sales account 850 1,098 1,098 The following do not appear in suspense account: L Johnson's dishonoured cheque is an error of principle the wrong class of account was debited, general expenses account in the general ledger instead of L Johnson's account in the sales ledger. Goods taken for personal use by W Trent is an error of omission no entries have been made in the accounts. Payment for servicing the computer is an error of principle computer account was debited instead of computer expenses account.

26 (iii) Profit under-stated Profit over-stated CHAPTER 20 Control Accounts 20.1 Dr Sales Ledger Control Account: Section 1 Cr Jan Balances b/d 84,200 1 Jan Balances b/d 190 Sales for year 678,672 Cash received from debtors 697, Dec Balances c/d 281 Sales returns 3,475 Discount allowed 2,760 Bad debts written off 3, Dec Balances c/d 55, , , Jan Balances b/d 55,684 1 Jan Balances b/d (a) Dr Bought Ledger (Purchases Ledger) Control Account Cr Cash paid to creditors 59,328 1 Jan Balances b/d 13,140 Discount received 2,472 Purchases 69,010 Purchases returns 930 Interest charged by creditors 150 Transfers to credit Cash overpaid returned 20 accounts in sale ledger Jun Balances c/d 19,370 82,320 82,320 (b) 1 Jul Balances b/d 19,370 Control accounts: give a summary of the transactions in a large number of accounts help in locating errors within the accounts which they control make fraud more difficult are an aid to management by giving up-to-date information on the total of debtors or creditors preparation of final accounts is speeded up, as the control account balances can be used for debtors and creditors Note: the question asked for two reasons Dr Sales Ledger Control Account: Section 2 Cr Jan Balances b/d 136,200 1 Jan Balances b/d 1,260 Sales for year 497,285 Cash received from debtors 526, Dec Balances c/d 1,328 Sales returns 1,226 Discount allowed 887 Bad debts written off 1, Dec Balances c/d 103, , , Jan Balances b/d 103,862 1 Jan Balances b/d 1,328 25

27 20.3 Dr Sales Ledger Control Account Cr Apr Balances b/d 95,617 1 Apr Balances b/d 613 Credit sales 759,348 Sales returns 3, Apr Balances c/d 161 Cash received from debtors 703,195 Discount allowed 25,355 Bad debts written off 5, Apr Balances c/d 117, , ,126 1 May Balances b/d 117,291 1 May Balances b/d Dr Sales Ledger Control Account Cr May Balances b/d 9,134 1 May Balances b/d 44 Credit sales 11,524 Cash received from debtors 970 Dishonoured cheques 58 Cheques received from debtors 9, May Balances c/d 80 Discount allowed 382 Bad debts 250 Sales returns 200 Set-off May Balances c/d 9,226 20,796 20,796 1 Jun Balances b/d 9,226 1 Jun Balances b/d 80 Dr Purchases Ledger Control Account Cr Apr Balances b/d Apr Balances b/d 78,298 Purchases returns 4,581 Credit purchases 621,591 Cash paid to creditors 612, Apr Balances c/d 329 Discount received 8, Apr Balances c/d 74, , ,218 1 May Balances b/d May Balances b/d 74,169 Dr Purchases Ledger Control Account Cr May Balances b/d 53 1 May Balances b/d 13,086 Cheques paid to creditors 10,532 Credit purchases 21,555 Discount received May Balances c/d 116 Purchases returns 908 Set-off May Balances c/d 22,572 34,757 34,757 1 Jun Balances b/d Jun Balances b/d 22,572 Note: cash sales and cash purchases do not go through the control accounts change in provision for bad debts is not entered in the sales ledger control account Control accounts: give a summary of the transactions in a large number of accounts help in locating errors within the accounts which they control make fraud more difficult are an aid to management by giving up-to-date information on the total of debtors or creditors speed up the preparation of final accounts, as the balances can be used for debtors and creditors Credit balances on debtors' accounts may be caused because: the customer has overpaid in error goods have been paid for, and later the goods are returned and a credit note issued the customer has made a payment in advance 26

28 CHAPTER 21 Incomplete Records 21.1 JAMES HARVEY CALCULATION OF STOCK LOSS FOR THE YEAR Opening stock 21,500 Purchases 132,000 Cost of stock available for sale 153,500 Sales 180,000 Less Normal gross profit margin (30%) 54,000 Cost of sales 126,000 Estimated closing stock 27,500 Less Actual closing stock 26,000 Value of stock loss 1, (a) STATEMENT OF ASSETS AND LIABILITIES OF BRIAN WITHERS AS AT 1 MAY 20-7 Assets Fixed assets 45,000 Stock 6,400 Debtors 6,240 Expenses prepaid 140 Bank ,500 Less Liabilities Creditors 1,330 Expenses owing 70 Loan from father 5,000 6,400 Capital at 1 May , (a) STATEMENT OF ASSETS AND LIABILITIES OF BILL BROWN AS AT 1 APRIL 20-8 Assets Furniture and fittings 2,655 Stock 1,350 Debtors 7,200 Cash and bank ,655 Less Liabilities Creditors 8,505 Capital at 1 April ,150 STATEMENT OF ASSETS AND LIABILITIES OF BILL BROWN AS AT 31 MARCH 20-9 Assets Furniture and fittings 2,390 Stock 840 Debtors 5,400 Cash and bank 1,350 9,980 Less Liabilities Creditors 6,831 Capital at 31 March ,149 (b) STATEMENT OF ASSETS AND LIABILITIES OF BRIAN WITHERS AS AT 30 APRIL 20-8 Assets Fixed assets 46,500 Stock 6,700 Debtors 6,430 Expenses prepaid 180 Bank ,600 Less Liabilities Creditors 1,450 Expenses owing 50 Loan from father 4,000 5,500 Capital at 30 April ,100 (c) (d) net profit or loss for the year = closing capital opening capital + drawings capital introduced 55,100 52, ,400 ( 700 x 12) 2,000 = 9,400 greater accuracy trial balance can be extracted at any time receipts and payments correctly recorded control of debtors and creditors (b) Capital at 1 April ,150 Add Additional capital 500 3,650 Less Drawings 2,250 1,400 Profit for year (missing figure) 1,749 Capital at 31 March , (e) expenses matched to the financial year, ie the accruals concept

29 21.4 STATEMENT OF ASSETS AND LIABILITIES OF D BRADLEY AS AT 30 JUNE 20-4 Assets Fixtures 1,800 Stock 13,680 Debtors 4,250 Prepaid rates 280 Cash ,130 Less Liabilities Creditors 2,575 Accrued electricity 485 Bank overdraft 2,025 5,085 Capital at 30 June ,045 Dr Sales Ledger Control Account Cr 20-4/ /-5 1 Jul Balances b/d 4,250 Bank receipts 22,820 Sales* 35,315 Cash receipts (see below) 11, Jun Balances c/d 4,925 39,565 39, / /-6 1 Jul Balances b/d 4,925 Note: cash receipts during the year are 5,280 (wages) + 1,250 (general expenses) + 5,200 (drawings of 100 per week) + 90 (increase in cash balance) = 11,820. Dr Purchases Ledger Control Account Cr 20-4/ /-5 Payments to creditors 18,682 1 Jul Balances b/d 2, Jun Balances c/d 3,520 Purchases* 19,627 22,202 22, / /-6 1 Jul Balances b/d 3,520 Dr Electricity Control Account Cr 20-4/ /-5 Bank 1,825 1 Jul Balance b/d Jun Balance c/d Jun Profit and loss account* 1,860 2,345 2, / /-6 1 Jul Balance b/d 520 Dr Rent and Rates Control Account Cr 20-4/ /-5 1 Jul Balance b/d Jun Profit and loss account* 2,290 Bank 2, Jun Balance c/d 340 2,630 2, / /-6 1 Jul Balance b/d 340 * Missing figure 28 D BRADLEY TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 20-5 Sales 35,315 Opening stock 13,680 Purchases 19,627 33,307 Less Closing stock 12,790 Cost of Goods Sold 20,517 Gross profit 14,798 Less expenses: Electricity 1,860 Rent and rates 2,290 Wages 5,280 General expenses 1,250 Provision for depreciation: fixtures 1,800 x 10% 180 motor van 2,400 x 25% ,460 Net profit 3,338 BALANCE SHEET AS AT 30 JUNE 20-5 Fixed Assets Cost Dep'n to date Net Fixtures 1, ,620 Motor van 2, ,800 4, ,420 Current Assets Stock 12,790 Debtors 4,925 Prepayment (rates) 340 Bank 1,038 Cash ,303 Less Current Liabilities Creditors 3,520 Accrual (electricity) 520 4,040 Working Capital 15,263 NET ASSETS 18,683 FINANCED BY Capital Opening capital 15,045 Additional capital 5,500 20,545 Add Net profit 3,338 23,883 Less Drawings 5,200 18,683

30 21.5 (a) JOHN MARCUS TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 20-7 Sales 117,460 Opening stock 12,400 Purchases (missing figure) 91, ,595 Less Closing stock ( 12, %) 15,500 Cost of Goods Sold 88,095 Gross profit (25% of sales) 29,365 Discount received ,925 Less expenses: Discount allowed 720 Wages 12,680 Rent, rates and electricity 8, ,740 Bad debts written off 180 Provision for depreciation: fixtures and fittings 1,600 motor van 1,050 Provision for bad debts ,230 Net profit 4,695 (b) BALANCE SHEET AS AT 30 JUNE 20-7 Fixed Assets Cost Dep'n to date Net Fixtures and fittings 16,000 8,000 8,000 Motor van 4,200 1,050 3,150 20,200 9,050 11,150 Current Assets Stock 15,500 Debtors 5,200 Less Provision for bad debts 260 4,940 Prepayment (rent) 520 Bank 5,495 26,455 Less Current Liabilities Creditors 4,650 Accrual (electricity) 260 4,910 Working Capital 21,545 NET ASSETS 32,695 FINANCED BY Capital Opening capital 28,000 Add Net profit 4,695 32,695 Dr Sales Ledger Control Account Cr 20-6/ /-7 1 Jul Balances b/d 2,900 Bad debts written off 180 Sales 117,460 Discount allowed 720 Bank receipts (missing figure) 114, Jun Balances c/d 5, , , / /-8 1 Jul Balances b/d 5,200 Dr Purchases Ledger Control Account Cr 20-6/ /-7 Discount received Jul Balances b/d 3,050 Bank payments Purchases 91,195 (missing figure) 89, Jun Balances c/d 4,650 94,245 94, / /-8 1 Jul Balances b/d 4,650 Dr Cash Book Summary Cr 20-6/ /-7 1 Jul Balance b/d 6,100 Payments to creditors 89,035 Receipts from debtors 114,260 Wages 12,680 Rent, rates and electricity 8,950 Motor van 4, Jun Balance c/d 5, , , / /-8 1 Jul Balance b/d 5,495 Tutorial note The trading account in this question is reconstructed by calculating gross profit (25% of sales), and then working back to calculate cost of goods sold and purchases. When purchases is known, the control accounts for purchases ledger and sales ledger are completed to give the missing figures of payments to creditors and receipts from debtors. The cash book summary for the year can then be constructed Calculation of stock loss on 30 November Opening stock 94,300 Purchases 187,600 COST OF STOCK AVAILABLE FOR SALE 281,900 Sales 251,200 Less Normal gross profit percentage (22%) 55,264 COST OF GOODS SOLD 195,936 ESTIMATED CLOSING STOCK 85,964 Less Value of stock salvaged 6,800 VALUE OF STOCK LOST (ie insurance claim) 79,164 29

31 CHAPTER 22 Club and Society Accounts 22.1 (a) MUSIC SOCIETY Estimated Receipts and Payments Account for the year ending 31 August / /-1 Receipts Payments Subscriptions (150 x 20) 3,000 Hire of hall (52 x 20) 1,040 Sale of refreshments Light and heat (52 x 5) 260 (150 x 40) 6,000 Stereo equipment 1,200 Insurance 90 Records 1,000 Purchase of refreshments (150 x 20) 3, Aug Balance c/d 2,410 9,000 9, / /-2 1 Sep Balance b/d 2,410 (b) ESTIMATED INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDING 31 AUGUST 20-1 Income Subscriptions 3,000 Refreshments Sales 6,000 Less purchases 3,000 Profit on refreshments 3,000 6,000 Less Expenditure Hire of hall 1,040 Light and heat 260 Provision for depreciation: stereo equipment 300 Insurance 90 Records 1,000 2,690 Surplus of income over expenditure 3,310 (c) ESTIMATED BALANCE SHEET AS AT 31 AUGUST 20-1 Fixed Assets Cost Dep'n to date Net Stereo equipment 1, Current Assets Bank 2,410 NET ASSETS 3,310 REPRESENTED BY Accumulated fund Add surplus of income over expenditure for year 3,310 3, GREENROOM SOCIAL CLUB INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 30 JUNE 20-- Income Subscriptions 22, ,383 Games' fees Drink machine receipts ,562 Less Expenditure Wages 15, ,408 Secretary's salary 2,700 Rent of hall 900 Printing and postage 2, ,935 Loss on dance 198 Provision for depreciation: furniture 3,240 3, ,276 Surplus of income over expenditure 2,286 BALANCE SHEET AS AT 30 JUNE 20-- Fixed Assets Cost Dep'n to date Net Furniture 3, ,105 Current Assets Stock of stationery 180 Subscriptions due 225 Bank 5,283 5,688 Less Current Liabilities Prepayment of subscriptions 72 Prepayment of games' fees 27 Accrued wages Working Capital 5,481 8,586 Less Long-term Liabilities Bank loan 4,500 NET ASSETS 4,086 REPRESENTED BY Accumulated fund 1,800 Add surplus of income over expenditure for year 2,286 4,086 30