Business Accounts Tutor Pack

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1 Business Accounts Tutor Pack answers to chapter questions The answers shown here are to the questions which are not answered at the back of the main text. chapter number chapter answers page

2 Osborne Books Limited 2012 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photo-copying, recording or otherwise, without the prior consent of the publishers, or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 9HE. Osborne Books is grateful to Roger Petheram for checking the answers. All answers are the responsibility of the publisher. Published by Osborne Books Limited Tel books@osbornebooks.co.uk

3 CHAPTER 1 What are Business Accounts? 1.2 documents processing of prime documents relating to financial transactions initial recording of transactions recording financial transactions in primary accounting records, or books of prime entry double-entry accounts system transfer from primary accounting records into the double-entry book-keeping system of accounts in the ledger trial balance extraction of figures from all the double-entry accounts to check their accuracy final accounts production of a profit and loss account and a balance sheet Information from the accounting system includes: purchases to date sales to date expenses to date debtors total amount owed to the business, and individual debtors creditors total amount owed by the business, and individual creditors assets owned liabilities owed profit during a particular period 1.3 financial accountant preparation of final accounts negotiation with Inland Revenue on taxation matters for a limited company, preparation of final accounts which comply with the Companies Act 1985 cost and management accountant obtains information about recent costs of the business, and costs of products/services estimates costs for the future, and prepares budgets prepares reports and makes recommendations to the owner(s)/managers auditors external statutory audit addressed to the shareholders of a limited company certifying that the accounts show a 'true and fair view' of the business and comply with the legal requirements of the Companies Act 1985 auditors internal internal checking and control procedures of the business in which they are employed In addition, there are likely to be advertisements for book-keepers to carry out various aspects of business accounting. 1.4 (a) Business entity the accounts record and report on the financial transactions of a particular business, and not the owner's personal financial transactions. (b) Money measurement the accounting system uses money as the common denominator in recording and reporting all business transactions; thus the loyalty of a firm's workforce or the quality of a product cannot be recorded because these cannot be reported in money terms. 1.5 assets items owned by a business; liabilities items owed by a business debtors individuals or businesses who owe money in respect of goods or services supplied by the business; creditors individuals or businesses to whom money is owed by the business purchases goods bought, either on credit or for cash, which are intended to be resold later; sales the sale of goods, whether on credit or for cash, in which the business trades credit purchases goods bought, with payment to be made at a later date; cash purchases goods bought and paid for immediately asset of bank increases by 8,000 capital increases by 8,000 asset 8,000 liability 0 = capital 8,000 asset of computer increases by 4,000 asset of bank decreases by 4,000 asset 8,000 liability 0 = capital 8,000 asset of bank increases by 3,000 liability of loan increases by 3,000 asset 11,000 liability 3,000 = capital 8,000 asset of van increases by 6,000 asset of bank decreases by 6,000 asset 11,000 liability 3,000 = capital 8,000 CHAPTER 2 Double-entry Book-keeping: First Principles 2.1 Dr Capital Account Cr Feb Bank 7,500 Dr Computer Account Cr Feb Bank 2,000 Dr Rent Paid Account Cr Feb Bank 750 Dr Wages Account Cr Feb Bank Feb Bank 380 Dr Bank Loan Account Cr Feb Bank 2,500 Dr Commission Received Account Cr Feb Bank 145 Dr Drawings Account Cr Feb Bank 200

4 Dr Van Account Cr Feb Bank 6, Dr Bank Account Cr Aug Capital 5,000 3 Aug Computer 1, Aug S Orton: loan 1,000 7 Aug Rent paid Aug Office fittings Aug Office fittings 2, Aug Commission received Aug S Orton: loan 150 Dr Capital Account Cr Aug Bank 5,000 Dr Computer Account Cr Aug Bank 1,800 Dr Rent Paid Account Cr Aug Bank 100 Dr Commission Received Account Cr Aug Cash Aug Bank 150 Dr Cash Account Cr Aug Commission received Aug Drawings 100 Dr Office Fittings Account Cr Aug Bank 2, Aug Bank 250 Dr Sally Orton: Loan Account Cr Aug Bank Aug Bank 1,000 Dr Drawings Account Cr Aug Cash Dr Bank Account Cr 1 Nov Capital 75,000 3 Nov Photocopier 2,500 7 Nov Bank loan 70, Nov Office premises 130, Nov Cash Nov Business rates 3, Nov Office fittings Nov Office fittings 1, Nov Commission received Nov Wages 250 Dr Capital Account Cr 1 Nov Bank 75,000 Dr Photocopier Account Cr 3 Nov Bank 2,500 Dr Bank Loan Account Cr 7 Nov Bank 70,000 Dr Office Premises Account Cr 10 Nov Bank 130,000 Dr Rates Account Cr 12 Nov Bank 3,000 Dr Office Fittings Account Cr 14 Nov Bank 1, Nov Bank 200 Dr Cash Account Cr 15 Nov Commission received Nov Drawings Nov Bank 100 Dr Commission Received Account Cr 15 Nov Cash Nov Bank 200 Dr Drawings Account Cr 18 Nov Cash 125 Dr Wages Account Cr 20 Nov Bank 250 2

5 2.6 Bank Account 20-7 Debit Credit Balance 1 Nov Capital 75,000 75,000 Dr 3 Nov Photocopier 2,500 72,500 Dr 7 Nov Bank loan 70, ,500 Dr 10 Nov Office premises 130,000 12,500 Dr 12 Nov Rates 3,000 9,500 Dr 14 Nov Office fittings 1,500 8,000 Dr 20 Nov Wages 250 7,750 Dr 23 Nov Cash 100 7,850 Dr 25 Nov Office fittings 200 8,050 Dr 28 Nov Commission received 200 8,250 Dr Dr Delivery Van Account Cr 22 Oct Bank 4,000 Dr Wages Account Cr 25 Oct Bank Dr Purchases Account Cr 2 Apr Wyvern Producers Ltd Apr A Larsen 250 CHAPTER 3 Double-entry Book-keeping: Further Transactions 3.1 Dr Bank Account Cr 1 Oct Capital 2,500 2 Oct Purchases Oct Sales Oct Purchases 90 8 Oct Sales Oct Purchases Oct K Smithson: loan 2, Oct Delivery van 4, Oct Sales Oct Wages Oct Sales 110 Dr Capital Account Cr 1 Oct Bank 2,500 Dr Purchases Account Cr 2 Oct Bank Oct Bank Oct Bank 250 Dr Wyvern Producers Ltd Cr 9 Apr Purchases returns 50 2 Apr Purchases Apr Bank 150 Dr A Larsen Cr 26 Apr Purchases returns 45 4 Apr Purchases 250 Dr Sales Account Cr 5 Apr Pershore Patisserie Apr Bank Apr Bank Apr Cash 100 Dr Pershore Patisserie Cr 5 Apr Sales Apr Sales returns Apr Bank 125 Dr Sales Account Cr 4 Oct Bank Oct Bank Oct Bank Oct Bank 110 Dr J Smithson: Loan Account Cr 12 Oct Bank 2,000 Dr Bank Account Cr 7 Apr Sales Apr Wyvern Producers Ltd Apr Sales Apr Amery Scales Ltd Apr Pershore Patisserie 125 Dr Purchases Returns Account Cr 9 Apr Wyvern Producers Ltd Apr A Larsen 45 3

6 Dr Sales Returns Account Cr 15 Apr Pershore Patisserie 25 Dr Weighing Machine Account Cr 17 Apr Amery Scales Ltd 250 Dr Amery Scales Ltd Cr 30 Apr Bank Apr Weighing machine 250 Dr Cash Account Cr 28 Apr Sales Apr Wages 90 Dr Wages Account Cr 29 Apr Cash Dr Purchases Account Cr Jun Designs Ltd Jun Mercia Knitwear Ltd Jun Designs Ltd 285 Dr Cash Account Cr Jun Sales Jun Rent paid Jun Sales 180 Dr Purchases Returns Account Cr Jun Designs Ltd Jun Mercia Knitwear Ltd 80 Dr Mercia Knitwear Ltd Cr Jun Purchases returns 80 7 Jun Purchases 400 Dr Wyvern Trade Supplies Cr Jun Sales Jun Sales returns Jun Bank 300 Dr Sales Returns Account Cr Jun Wyvern Trade Supplies 50 Dr Rent Paid Account Cr Jun Cash 125 Dr Designs Ltd Cr Jun Purchases returns Jun Purchases Jun Bank Jun Purchases 285 Dr Sales Account Cr Jun Bank Jun Cash Jun Wyvern Trade Supplies Jun Bank Jun Cash Transaction Account debited Account credited (a) purchases bank (b) bank sales (c) purchases Teme Traders (d) L Harris sales (e) Teme Traders purchases returns (f) sales returns L Harris (g) bank D Perkins: loan (h) cash bank Dr Bank Account Cr Jun Sales Jun Designs Ltd Jun Sales Jun Wyvern Trade Supplies 300 4

7 CHAPTER 4 Business Documents 4.3 invoice to Excel Fashions 49 Highland Street Longton Mercia LT3 2XL INVOICE JANE SMITH, FASHION WHOLESALER Unit 21, Eastern Industrial Estate, Wyvern, Wyvernshire, WY1 3XJ Tel Fax VAT REG GB invoice no 2451 account your reference 4.4 invoice to The Card Shop 126 The Cornbow Teamington Spa Wyvernshire WY33 0EG INVOICE DEANSWAY TRADING COMPANY The Model Office, Deansway, Rowcester, RW1 2EJ Tel Fax VAT REG GB invoice no 8234 account your reference deliver to as above date/tax point today deliver to as above date/tax point today quantity description price unit total discount net % 5 Dresses each Suits each Coats each quantity description price unit total discount net % 5 Assorted rubbers 5.00 box Shorthand notebooks Ring Binders 0.50 each terms 2.5% cash discount for full settlement within 14 days Net 30 days Carriage paid E & OE GOODS TOTAL VAT 96.03* TOTAL terms 2.5% cash discount for full settlement within 14 days Net 30 days Carriage paid E & OE GOODS TOTAL VAT 37.05* TOTAL * x 97.5% x 20% = VAT Note: Students can complete details for telephone, fax, VAT registration number and order number * x 97.5% x 20% = VAT Note: Students can complete details for telephone, fax, VAT registration number and order number 5

8 4.5 STATEMENT OF ACCOUNT Dr G Lewis Cr Feb Bank Feb Purchases Feb Discount received Feb Purchases Feb Bank Feb Discount received TO J Wilson account 3993 date 31 March 20-- Dr L Jarvis Cr Feb Sales Feb Bank Feb Discount allowed Dr G Patel Cr Feb Sales Feb Bank Feb Discount allowed date no. details debit credit balance Mar Balance b/d Dr 3 Mar 8119 Invoice Dr 10 Mar Cheque Dr 23 Mar CN345 Credit Note Dr 28 Mar 8245 Invoice Dr Dr Bank Account Cr Feb L Jarvis Feb G Lewis Feb G Patel Feb G Lewis 152 Dr Discount Received Account Cr Feb G Lewis Feb G Lewis 8 AMOUNT NOW DUE Dr Discount Allowed Account Cr Feb L Jarvis 3 20 Feb G Patel Dr Purchases Account Cr Feb G Lewis Feb G Lewis 160 Dr Sales Account Cr Feb L Jarvis Feb G Patel 240 6

9 CHAPTER 5 Balancing Accounts the Trial Balance 5.1 (a) and (c) Dr Bank Account Cr Jan Capital 10,000 4 Jan Rent paid Jan Sales 1,000 5 Jan Shop fittings 1, Jan Sales 1, Jan Comp Supplies Ltd 5, Jan Sales 1, Jan Balance c/d 6,700 13,700 13,700 1 Feb Balance b/d 6,700 2 Feb Rent paid Feb Sales 1, Feb Shop fittings Feb Sales 1, Feb Comp Supplies Ltd 6, Feb Rowcester College Feb Balance c/d 5, Feb Sales 1, Feb Sales 1,100 13,000 13,000 1 Mar Balance b/d 5,300 Dr Capital Account Cr Jan Bank 10,000 Dr Rent Paid Account Cr Jan Bank Feb Balance c/d 1,000 2 Feb Bank 500 1,000 1,000 1 Mar Balance b/d 1,000 Dr Shop Fittings Account Cr Jan Bank 1, Feb Balance c/d 2, Feb Bank 850 2,350 2,350 1 Mar Balance b/d 2,350 Dr Comp Supplies Limited Cr Jan Bank 5,000 7 Jan Purchases 5, Jan Balance c/d 6, Jan Purchases 6,500 11,500 11,500 5 Feb Purchases returns Feb Balance b/d 6, Feb Bank 6, Feb Purchases 5, Feb Balance c/d 5,500 12,000 12,000 1 Mar Balance b/d 5,500 Dr Sales Account Cr Jan Balance c/d 4, Jan Bank 1, Jan Bank 1, Jan Rowcester College Jan Bank 1,450 4,550 4, Feb Balance c/d 11,150 1 Feb Balance b/d 4,550 4 Feb Bank 1, Feb Bank 1, Feb Bank 1, Feb Bank 1, Feb Rowcester College 1,050 11,150 11,150 1 Mar Balance b/d 11,150 Dr Rowcester College Cr Jan Sales Jan Sales returns Jan Balance c/d Feb Balance b/d Feb Bank Feb Sales 1, Feb Balance c/d 1,050 1,800 1,800 1 Mar Balance b/d 1,050 Dr Purchases Account Cr Jan Comp Supplies Ltd 5, Jan Balance c/d 11, Jan Comp Supplies Ltd 6,500 11,500 11,500 1 Feb Balance b/d 11, Feb Balance c/d 17, Feb Comp Supplies Ltd 5,500 17,000 17,000 1 Mar Balance b/d 17,000 Dr Sales Returns Account Cr Jan Rowcester College 100 Dr Purchases Returns Account Cr Feb Comp Supplies Ltd 150 7

10 (b) Trial balance as at 31 January 20-9 Dr Cr Name of Account Bank 6,700 Capital 10,000 Rent paid 500 Shop fittings 1,500 Purchases 11,500 Comp Supplies Limited 6,500 Sales 4,550 Rowcester College 750 Sales returns ,050 21,050 (d) Trial balance as at 28 February 20-9 Dr Cr Name of Account Bank 5,300 Capital 10,000 Rent paid 1,000 Shop fittings 2,350 Purchases 17,000 Comp Supplies Limited 5,500 Sales 11,150 Rowcester College 1,050 Sales returns 100 Purchases returns ,800 26, Trial balance of Jane Greenwell as at 28 February 20-1 Dr Cr Name of account Bank 1,250 Purchases 850 Cash 48 Sales 730 Purchases returns 144 Creditors 1,442 Equipment 2,704 Van 3,200 Sales returns 90 Debtors 1,174 Wages 1,500 Capital (missing figure) 6,000 9,566 9, Four from: Error of omission Business transaction completely omitted from the accounting records. For example, cash sale omitted from both cash account and sales account. Reversal of entries Debit and credit entries on the wrong side of the two accounts concerned. For example, cash sale entered wrongly as debit sales account, credit cash account. Mispost/error of commission Transaction entered to the wrong person's account. For example, a sale of goods on credit to A T Hughes has been entered as debit A J Hughes' account, credit sales account. Error of principle Transaction entered in the wrong type of account. For example, cost of petrol for vehicles has been entered as debit motor vehicles account, credit bank account. Error of original entry (or transcription) Amount entered incorrectly in both accounts. For example, sale of 45 entered in both sales account and the debtor's account as 54. Compensating error Two errors cancel each other out. For example, balance of purchases account calculated wrongly at 10 too much, compensated by the same error in sales account. CHAPTER 6 Division of the Ledger Primary Accounting Records 6.2 Purchases Day Book Date Details Invoice Folio Net VAT Gross Feb Softseat Ltd Feb PRK Ltd Feb Quality Furnishings Feb Softseat Ltd Feb Totals for month Sales Day Book Date Details Invoice Folio Net VAT Gross Feb High Street Stores Feb Peter Lounds Ltd Feb Carpminster College Feb High Street Stores Feb Totals for month 1, ,296 8

11 PURCHASES LEDGER Dr Softseat Ltd Cr 28 Feb Balance c/d Feb Purchases Feb Purchases Mar Balance b/d 576 Dr PRK Ltd Cr 2 Feb Purchases Purchases Day Book Date Details Invoice Folio Net VAT Gross May M Roper & Sons 562 PL May Wyper Ltd 82 PL May Wyper Ltd 86 PL May M Roper & Sons 580 PL May Wyper Ltd 91 PL May M Roper & Sons 589 PL May Totals for month 1, , Dr Quality Furnishings Cr 15 Feb Purchases 192 SALES LEDGER Dr High Street Stores Cr 8 Feb Sales Feb Balance c/d Feb Sales Purchases Returns Day Book Date Details Credit Folio Net VAT Gross Note May M Roper & Sons 82 PL May Wyper Ltd 6 PL May M Roper & Sons 84 PL May Totals for month Mar Balance b/d 768 Dr Peter Lounds Ltd Cr 14 Feb Sales 144 Dr Carpminster College Cr 18 Feb Sales 384 GENERAL LEDGER Dr Purchases Account Cr 28 Feb Purchases Day Book 720 Dr Sales Account Cr 28 Feb Sales Day Book 1,080 Dr Value Added Tax Account Cr 28 Feb Purchases Day Book Feb Sales Day Book Feb Balance c/d PURCHASES LEDGER Dr Wyper Ltd (account no 301) Cr 23 May Purchases Returns May Balance b/d May Balance c/d May Purchases May Purchases May Purchases Jun Balance b/d Dr M Roper & Sons (account no 302) Cr 18 May Purchases Returns May Balance b/d May Purchases Returns May Purchases May Balance c/d May Purchases May Purchases Jun Balance b/d Mar Balance b /d 72 9

12 GENERAL LEDGER Dr Purchases Account Cr 31 May Purchases Day Book 1, Dr Purchases Returns Account Cr 31 May Purchases Day Book Dr Value Added Tax Account Cr 31 May Purchases Day Book May Purchases Returns Day Book May Balance c/d Jun Balance b/d CHAPTER 7 Value Added Tax 7.2 amount of VAT-exclusive VAT amount (a) and (b) Dr Value Added Tax Account Cr Mar Balance b/d Mar Purchases Day Book Mar Sales Day Book 1, Mar Sales Returns Day Book Mar Purchases Returns Day Book Mar Balance c/d 1,204 1,967 1,967 (c) 1 Apr Balance b/d 1,204 At the end of March 20-0, the Value Added Tax account has a credit balance of 1,204. This amount is owing to HM Revenue & Customs and will be paid at the end of the three-month VAT period, together with VAT due for the subsequent month(s) of the VAT quarter. CHAPTER 8 Cash Book 8.3 Dr Cash Book Cr Date Details Folio Disc Cash Bank Date Details Folio Disc Cash Bank allwd recd Aug Balances b/d 276 4,928 5 Aug T Hall Ltd Aug Wild & Sons Ltd Aug Wages Aug Bank C Aug Cash C Aug A Lewis Ltd 20 1, Aug F Jarvis Aug Harvey & Sons Ltd Aug Wages Aug Wild & Sons Ltd Aug J Jones Aug Bank C Aug Salaries 2, Aug Telephone Aug Cash C Aug Balances c/d 361 3, ,051 7, ,051 7,937 1 Sep Balances b/d 361 3, Dr Cash Book Cr Date Details Folio Discount Cash Bank Date Details Folio Discount Cash Bank allowed received Year 6 Year 6 1 Mar Balances b/d 106 3,214 2 Mar Rent Mar Sales* Mar Cleaning expenses 35 8 Mar Sales 1,680 9 Mar Purchases , Mar Bank C Mar Cash C Mar Sales 1, Mar Postages Mar Bank C Mar Telephone Mar Sales 2, Mar Stationery Mar Sales* 200 2, Mar Cash C Mar S Britton Mar Misc expenses Mar D F Pratt 50 1, Mar Wages , Mar Electricity Mar D Coyne Mar F Cox Mar Balances c/d 423 8, , ,632 1 Apr Balances b/d 423 8,259 * An alternative way of showing the transactions of 3 March and 29 March is to record the full amount of sales in the debit cash column, and then to show the amount banked as a separate transfer, ie debit bank, credit cash. 10

13 8.6 Dr (Receipts) Date Details Folio Cash Bank Disc VAT Sales Sales Sundry allwd ledger 20-7 p p p p p p p 12 May Balances b/d May Sales GL May Sales GL May T Jarvis SL May Sales GL May Cash C May Sales GL May Wyvern District Cncl SL , , Cr (Payments) Date Details Folio Cash Bank Disc VAT Purchases Purchases Sundry recd ledger 20-7 p p p p p p p 12 May Shop rent GL May Terry Carpets Ltd PL May Stationery GL May Bank C May Longlife Carpets Ltd PL May Wages GL May Balance c/d , , Transfers to general ledger discount allowed column total of 7.50 is debited to discount allowed account discount received column total of 8.95 is credited to discount received account Value Added Tax columns, the total of is credited to VAT account, while the total of 4.80 is debited to the VAT account sales column total of 1, is credited to sales account sundry column the individual payments are debited to shop rent account, , stationery account, 24.00, and wages account, The transactions in the columns for sales ledger and purchases ledger are respectively credited and debited to the individual accounts of the debtors and creditors. CHAPTER 9 Petty Cash Book 9.2 Security and confidentiality aspects of petty cash On taking over, check that the petty cash book has been balanced and that the amount of cash held agrees with the balance shown in the book. Start each week with the imprest amount of cash which has been agreed with the office manager. Keep the petty cash secure in a locked cash box, and keep control of the keys. Provide petty cash vouchers (in numerical order) on request. Pay out of petty cash against correctly completed petty cash vouchers ensuring that: the voucher is signed by the person receiving the money the voucher is signed by the person authorising payment (a list of authorised signatories will be provided) a receipt (whenever possible) is attached to the petty cash voucher, and receipt and petty cash voucher are for the same amount Write up the petty cash book (including calculation of VAT amounts when appropriate); it is important that the petty cash book is accurate. Store the completed petty cash vouchers safely filed in numerical order. They will need to be kept for at least six years in the company s archives, together with completed petty cash books. The office manager will carry out a surprise check from time-to-time the cash held, plus amounts of completed petty cash vouchers, should equal the imprest amount. At the end of each week (or month) balance the petty cash book and draw an amount of cash from the cashier equal to the amount of payments made, in order to restore the imprest amount. Prepare a posting sheet for the book-keeper with the totals of each analysis column, so that he/she can enter the amount of each expense into the double-entry system. Present the petty cash book and cash in hand for checking by the office manager. Deal with any discrepancies promptly, eg: a receipt and petty cash voucher total differing a difference between the totals of the analysis columns and the total payments column in the petty cash book a difference between the cash in the petty cash book and the balance shown in the petty cash book Where discrepancies and queries cannot be resolved, they should be referred to the office manager. Remember that all aspects of petty cash are confidential and should not be discussed with others. 11

14 petty cash voucher No. 851 date today description amount ( ) Postage on urgent parcel of spare parts to Evelode Supplies Ltd 4 45 signature authorised Jayne Smith A Student VAT Documentation will be a post office receipt for 4.45, being the amount of postages paid. petty cash voucher No. 852 date today description amount ( ) Airmail envelopes 2 00 signature authorised Tanya Howard A Student 2 00 VAT Receipts Date Details Voucher Total ANALYSIS COLUMNS number payment Postage Travelling Vehicle Cleaning Ledger Year Jun Balance b/d Jun Bank 2 Jun Postage Jun Rail fare Jun Petrol Jun Cleaning materials Jun S Lancaster Jun Petrol Jun Postage Jun Petrol Jun Rail fare Jun Postage Jun W Rose Jun Petrol Jun Balance c/d Jul Balance b/d Jul Bank Documentation will be a till receipt (or handwritten receipt) from the stationery shop for

15 9.7 Petty Cash Book Receipts Date Details Voucher Total Analysis columns No Payment VAT Postages Travel Meals Sundry Office Jun Balance b/d 2 Jun Postages Jun Travel expenses Jun Postages Jun Envelopes Jun Window cleaning Jun Taxi fare/meals Jun Post/packing Jun Taxi fare/meals Jun Pens/envelopes Jun Cash received 6 Jun Balance c/d Jun Balance b/d 9.9 Dr Sundry Office Expenses Account Cr 20-7 p 20-7 p 6 Jun Petty Cash Book CASH BOOK Dr Cash book Cr Cash Bank Cash Bank 20-7 p p 20-7 p p 6 Jun Petty Cash Book Dr Cash Book Cr Date Details Folio Discount Cash Bank Date Details Folio Discount Cash Bank allowed received Feb S Kahn 3, Feb Balance b/d 1, Feb Cash sales Feb Petty cash Feb B Shean Feb Insurance Feb H Shanks Feb Rent Feb S Groves , Feb Motor expenses GENERAL LEDGER Dr Value Added Tax Account Cr 20-7 p 20-7 p 6 Jun Petty Cash Book Dr Postages Account Cr 20-7 p 20-7 p 6 Jun Petty Cash Book Dr Travel Expenses Account Cr 20-7 p 20-7 p 6 Jun Petty Cash Book Feb Cash sales Feb Purchases Feb C Bentley Feb Drawings Feb Purchases Feb Balance c/d 1, , , Mar Balance b/d 1, Dr Meals Account Cr 20-7 p 20-7 p 6 Jun Petty Cash Book

16 PETTY CASH BOOK Receipts Date Details Voucher Total ANALYSIS COLUMNS number payment Sundry Cleaning Postage & Refreshments expenses Stationery Feb Balance b/d Feb Bank 5 Feb Refreshments Feb Postage stamps Feb Sundry expenses Feb Cleaner's wages Feb Postage Feb Refreshments Feb Sundry expenses Feb Balance c/d Mar Balance b/d 10.4 (a) Dr Cash Book (bank columns) Cr 1 May Balance b/d May P Stone May Cash May Alpha Ltd May C Brewster May E Deakin May Cash May Standing order: A-Z Insurance May Cash May Bank charges May Balance c/d Jun Balance b/d 428 (b) JANE DOYLE BANK RECONCILIATION STATEMENT AS AT 1 MAY 20-7 Balance at bank as per cash book 300 Add: unpresented cheque: cheque no Less: outstanding lodgement 54 Balance at bank as per bank statement 326 CHAPTER 10 Bank Reconciliation Statements 10.3 (a) Dr Cash Book (bank columns) Cr 20-7 p 20-7 p 1 Jan Balance b/d Jan Direct debit: Omni Finance Jan BACS credit: T K Supplies Jan Balance c/d , , Feb Balance b/d (b) P GERRARD BANK RECONCILIATION STATEMENT AS AT 31 JANUARY 20-7 Balance at bank as per cash book Add: unpresented cheques Bryant & Sons cheque no P Reid cheque no , Less: outstanding lodgement G Shotton Limited Balance at bank as per cash book 1, (c) BANK RECONCILIATION STATEMENT AS AT 31 MAY 20-7 Balance at bank as per cash book 428 Add: unpresented cheque E Deakin cheque no Less: outstanding lodgement cash 40 Balance at bank as per bank statement

17 10.5 MEMORANDUM TO:... FROM: Accounts Clerk DATE:... SUBJECT: Bank Reconciliation Statements CHAPTER 11 An Introduction to Computer Accounting 11.5 (a) Objections: jobs may be threatened and redundancies may occur the need for retraining possible bad effects to health caused by sitting in front of a computer all day: RSI (Repetitive Strain Injury), back problems, radiation and eye damage from computer screens (b) Potential benefits: Reconciliation of the bank statement balance with that shown in the cash book is carried out at the month-end as follows: 1. From the bank columns of the cash book tick off, in both cash book and bank statement: the receipts that appear in both the payments that appear in both 2. Identify the items that are unticked on the bank statement and enter them in the cash book on the debit or credit side as appropriate. These will be things such as BACS receipts, standing order and direct debit payments, bank charges and interest, unpaid cheques debited by the bank. However, if the bank has made a mistake by debiting or crediting our account in error, don t enter them in the cash book; instead, notify the bank for them to make the correction. 3. Balance the bank columns of the cash book to find the up-to-date balance. 4. Start the bank reconciliation statement with the balance brought down figure shown in the cash book. potential for updating IT skills through training possible increase in pay for skilled work better career prospects job satisfaction through automation of manual processes CHAPTER 12 Final Accounts In the bank reconciliation statement: add the unticked payments shown in the cash book these are unpresented cheques deduct the unticked receipts shown in the cash book these are outstanding lodgements 6. The resultant money amount on the bank reconciliation statement is the balance of the bank statement. 7. Date the reconciliation statement and file it away for future reference. Note that, if the balances of the cash book (bank columns) and the bank statement were not identical at the beginning of the month, then you will need to refer to the previous bank reconciliation statement prepared at the end of last month. Items appearing on that bank reconciliation statement must also be ticked off at step 1. Anything remaining unticked will be included in this month s reconciliation statement (step 5). Vehicle A Student 15

18 12.5 CLARE LEWIS TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 20-4 Sales 144,810 Opening stock 16,010 Purchases 96, ,328 Less Closing stock 13,735 Cost of Goods Sold 98,593 Gross profit 46,217 Less expenses: Salaries 18,465 Heating and lighting 1,820 Rent and rates 5,647 Sundry expenses 845 Vehicle expenses 1,684 28,461 Net profit 17, capital revenue expenditure expenditure (a) purchase of vehicles (b) rent paid on premises (c) wages and salaries (d) legal fees relating to the purchase of property (e) re-decoration of office (f) installation of air-conditioning in office (g) wages of own employees used to build extension to the stockroom (h) installation and setting up of a new machine BALANCE SHEET AS AT 31 DECEMBER 20-4 Fixed Assets Vehicles 9,820 Office equipment 5,500 15,320 Current Assets Stock 13,735 Debtors 18,600 32,335 Less Current Liabilities Creditors 12,140 Value Added Tax 1,210 Bank overdraft 4,610 17,960 Working Capital 14,375 NET ASSETS 29,695 FINANCED BY Capital Opening capital 25,250 Add Net profit 17,756 43,006 Less Drawings 13,311 29, (a) (i) Capital expenditure Weighing equipment for business use Extension to business premises Legal fees relating to extension (ii) Revenue expenditure Payment of local authority rates Sales assistants' wages (iii) Revenue receipt Rent received from sub-letting office space (b) (i) Trading account Sales assistants' wages (shown here in trading account because it is a direct selling expense, rather than a general profit and loss account expense) (ii) Profit and loss account Rent received from sub-letting office space Payment of local authority rates (iii) Balance sheet Weighing equipment for business use Extension to business premises (added to the cost of the premises) Legal fees relating to extension (shown in balance sheet, and added to the cost of the premises, because it is an expense which relates to the improvement of fixed assets, rather than a general profit and loss account expense) 16

19 CHAPTER 13 Accruals and Prepayments 13.1 (a) Expense in profit and loss account of 56,760; balance sheet shows wages and salaries accrued (current liability) of 1,120. (b) (c) Expense in profit and loss account of 2,852; balance sheet shows rates prepaid (current asset) of 713. Expense in profit and loss account of 1,800; balance sheet shows computer rental prepaid (current asset) of (a) H EGGLETON BALANCE SHEET AS AT 28 FEBRUARY 20-8 Fixed Assets Freehold property 50,000 Motor vehicles 12,600 Machinery 2,500 Fixtures and fittings 1,250 66, SOUTHTOWN SUPPLIES TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 20-9 Sales 420,000 Opening stock 70,000 Purchases 280, ,000 Less Closing stock 60,000 Cost of Goods Sold 290,000 Gross profit 130,000 Less expenses: Rent and rates 10, ,700 Electricity 3,100 Telephone 1,820 Salaries 35, ,050 Vehicle expenses 13,750 64,420 Net profit 65,580 Current Assets Stock 4,760 Debtors 540 Prepayment (insurance) 380 Cash 390 6,070 Less Current Liabilities Creditors 550 Bank 3,250 Accrual (wages) 900 4,700 Working Capital 1,370 67,720 Less Long-term Liabilities Mortgage 10,000 NET ASSETS 57,720 FINANCED BY: Capital Opening capital (missing figure) 45,750 Add net profit 13,970 59,720 Less drawings 2,000 57,720 (b) Dr Drawings Account Cr 20-7/ / Jun Bank Feb Capital 2, Aug Bank Dec Bank Feb Bank 500 2,000 2,000 17

20 13.6 Dr Capital Account Cr 20-7/ / Feb Drawings 2,000 1 Mar Balance b/d 45, Feb Balance c/d 57, Feb Profit and loss account 13,970 59,720 59,720 1 Mar Balance b/d 57,720 JOHN BARCLAY TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 20-9 Sales 864,321 Less Sales returns 2,746 Net sales 861,575 Opening stock (1 July 20-8) 63,084 Purchases (less 250 goods for own use) 599,878 Less Purchase returns 3,894 Net purchases 595, ,068 Less Closing stock (30 June 20-9) 66,941 Cost of Goods Sold 592,127 Gross profit 269,448 Add Discount received 4, ,399 BALANCE SHEET AS AT 30 JUNE 20-9 Fixed Assets Land and buildings 100,000 Vehicles 83,500 Office equipment 23, ,750 Current Asets Stock 66,941 Debtors 74,328 Prepayment 346 Bank 1, ,812 Less Current Liabilities Creditors 52,919 Value Added Tax 10,497 Accrual 1,250 64,666 Working Capital 78, ,896 Less Long-term Liabilities Bank loan 75,000 NET ASSETS 209,896 Less expenses: Office expenses 33,601 Salaries 122,611 Vehicle expenses 38,144 Discount allowed 3, ,543 Net profit 76,856 FINANCED BY: Capital Opening capital 155,000 Add net profit 76, ,856 Less drawings (plus 250 goods for own use) 21, ,896 18

21 CHAPTER 14 Depreciation of Fixed Assets 14.3 (a) Dr Vehicles Account Cr Jan Balance b/d 12,000 1 Oct Disposals account 12,000 1 Oct Disposals account 5, Dec Balance c/d 15,000 (part-exchange allowance) 1 Oct Bank 9,500 (balance paid by cheque) 27,000 27, Jan Balance b/d 15, JOHN HENSON TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 20-8 Sales 122,000 Opening stock 6,250 Purchases 71,600 77,850 Less Closing stock 8,500 Cost of Goods Sold 69,350 Gross profit 52,650 Add Discount received ,935 (b) (c) Dr Provision for Depreciation Account Vehicles Cr Oct Disposals account 7,200 1 Jan Balance b/d 7, Dec Balance c/d 3, Dec Profit & loss account 3,000 10,200 10, Jan Balance b/d 3,000 Dr Disposals Account Vehicles Cr Oct Vehicles account 12,000 1 Oct Vehicles account 5, Dec Profit and loss account 700 (part-exchange allowance) (profit on sale) 1 Oct Prov for dep'n account 7,200 12,700 12,700 Less expenses: Vehicle running expenses 1,480 Rent and rates 5,650 Office expenses 2,220 Wages and salaries 18,950 Provision for depreciation: office equipment 1,000 vehicle 3,000 32,300 Net profit 20,635 BALANCE SHEET AS AT 31 DECEMBER 20-8 Fixed Assets Cost Dep'n to date Net Office equipment 10,000 1,000 9,000 Vehicle 12,000 3,000 9,000 22,000 4,000 18,000 (d) Balance sheet (extract) of Rachael Hall as at 31 December 20-8 Cost Dep n to date Net Fixed assets Vehicles 15,000 3,000 12,000 Current Assets Stock 8,500 Debtors 5,225 Bank ,450 Less Current Liabilities Creditors 3,190 Value Added Tax 1,720 4,910 Working Capital 9,540 NET ASSETS 27,540 FINANCED BY: Capital Opening capital 20,000 Add Net profit 20,635 40,635 Less Drawings 13,095 27,540 19

22 14.5 SIMON ADO TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 OCTOBER Sales (work done) 19,480 Opening stock 180 Purchases of materials 3,415 3,595 Less Closing stock 190 Cost of Goods Sold 3,405 Gross profit 16,075 Add Discount received ,275 Less expenses: Advertising 90 Telephone 710 Motor expenses 580 Provision for depreciation: van 2,000 tools and equipment 300 3,680 Net profit 12,595 BALANCE SHEET OF SIMON ADO AS AT 31 OCTOBER Fixed Assets Cost Dep'n to date Net Van 8,000 2,000 6,000 Tools and equipment 3, ,700 11,000 2,300 8,700 Current Assets Stock 190 Prepayments 120 Cash Less Current Liabilities Creditors 85 Bank overdraft Working Capital 455 NET ASSETS 9,155 FINANCED BY: Capital Opening capital 2,960 Add Net profit 12,595 15,555 Less Drawings 6,400 9,155 CHAPTER 15 Bad Debts and Provision for Bad Debts 15.1 Profit and loss account (expenses) debit bad debts written off, 210 provision for bad debts, 500 Credit Balance sheet debtors 20,000, less provision for bad debts 500, net debtors 19, WONG PAU YEN TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 AUGUST Sales 94,600 Less Sales returns 1,300 Net sales 93,300 Opening stock 1,200 Purchases 51,000 Less Purchases returns 900 Net purchases 50,100 51,300 Less Closing stock 1,300 Cost of Goods Sold 50,000 Gross profit 43,300 Less expenses: Heat and light 1,400 Wages and salaries 19,660 Rent and rates 6,370 Motor expenses 1,340 Sundry expenses 6,040 Provision for depreciation: plant and machinery 2,000 vehicles 1,280 Provision for bad debts ,430 4,870 20

23 BALANCE SHEET AS AT 31 AUGUST Fixed Assets Cost Dep'n to date Net Plant and machinery 20,000 6,000 14,000 Vehicles 10,000 4,880 5,120 30,000 10,880 19,120 Current Assets Stock 1,300 Debtors 8,500 Less Provision for bad debts 340 8,160 Prepayment 360 Cash 100 9,920 Less Current Liabilities Creditors 4,660 Accruals 1,190 Bank overdraft 1,690 7,540 Working Capital 2,380 NET ASSETS 21,500 FINANCED BY: Capital Opening capital 24,230 Add Net profit 4,870 29,100 Less Drawings 7,600 21, D MARTIN TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER YEAR 6 Sales 337,200 Less Sales returns 4,950 Net sales 332,250 Opening stock 21,480 Purchases 191,200 Carriage inwards 1,200 Less Purchases returns 3,600 Net purchases 188, ,280 Less Closing stock 24,900 Cost of Goods Sold 185,380 Gross profit 146,870 Add income: Discount received 2,090 Reduction in provision for bad debts ,360 Less expenses: Rent 14,000 Electricity 4,160 Salaries 53,300 Carriage outwards 6,000 Insurance 3,420 Bad debts 2,400 Bank interest 720 Telephone 3,200 Discount allowed 2,700 Loan interest 2,600 Loss on sale of vehicle 750 Provision for depreciation: vehicles 5,000 office furniture 1,000 99,250 Net profit 50,110 21

24 BALANCE SHEET AS AT 31 DECEMBER YEAR 6 CHAPTER 16 The Extended Trial Balance Fixed Assets Cost Dep'n to date Net Freehold premises 160, ,000 Motor vehicles 25,000 10,000 15,000 Office furniture 10,000 3,500 6, ,000 13, ,500 Current Assets Stock 24,900 Debtors 31,400 Less Provision for bad debts 1,570 29,830 Prepayments 4,780 Cash ,110 Less Current Liabilities Creditors 7,880 Accruals 6,160 Bank overdraft 7,000 21,040 Working Capital 39, ,570 Less Long-term Liabilities Loan from D Samson 26,000 NET ASSETS 194,570 FINANCED BY: Capital Opening capital 184,460 Add Net profit 50, ,570 Less Drawings 40, ,570 Loss on sale of vehicle: cost price (1 January, year 3) 5,000 depreciation at 20% pa (years 3, 4 and 5) 3,000 book value at date of sale 2,000 sale proceeds 1,250 loss on sale (debited to profit and loss account) EXTENDED TRIAL BALANCE ALAN HARRIS 30 JUNE

25 CHAPTER 17 The Regulatory Framework of Accounting 17.1 Going concern concept This presumes that the business to which the final accounts relate will continue to trade in the foreseeable future. The trading and profit and loss account and balance sheet are prepared on the basis that there is no intention to reduce significantly the size of the business or to liquidate the business. If the business was not a going concern, assets would have very different values, and the balance sheet would be affected considerably. Example: fixed assets are valued at cost, less accumulated depreciation to date. Accruals concept This means that expenses and revenues are matched so that they concern the same goods and the same time period. Examples: The accrual of an expense in profit and loss account which has been used in the accounting period but not yet paid for. The prepayment of an expense for the next accounting period. The recording of opening and closing stocks in the trading account. The use of debtors' and creditors' accounts to record amounts owing to the business, or owed by the business. Consistency concept This requires that, when a business adopts particular accounting methods, it should continue to use such methods consistently over a number of accounting periods. In this way, direct comparison between the final accounts of different years can be made. Examples: The continued use of a particular depreciation method, eg straight-line. The method of stock valuation used. The treatment of capital and revenue expenditure. Prudence concept This concept requires that final accounts should always, where there is any doubt, report a conservative figure for profit or the valuation of assets. To this end, profits are not to be anticipated and should only be recognised when it is reasonably certain that they will be realised; at the same time, all known liabilities should be provided for. Examples: A provision for bad debts the debtors have not yet gone bad, but it is expected, from experience, that a certain percentage will eventually need to be written off as bad debts. The valuation of stock at the lower of cost and net realisable value in order to give the lower valuation for the final accounts (a) Opening stock at 1 January Year 7 Balance from ledger (1 January Year 7) 17,300 (1.1) adjustment of incorrect stock value each = recorded ,400 (1.2) items omitted from physical stock take, cost price 250 Revised stock valuation at 1 January Year 7 17,650 Closing stock at 31 March Year 7 Balance from ledger (31 March Year 7) 16,200 (2.1) reduction to net realisable value (500) 15,700 (2.2) correction of undercast on stock sheet 3,000 18,700 (2.3) reduction to net realisable value: (40) Revised stock valuation at 31 March Year 7 18, (b) TRADING ACCOUNT FOR QUARTER ENDED 31 MARCH YEAR 7 Sales 107,800 Opening stock 17,650 Purchases 54,200 71,850 Less Closing stock 18,660 Cost of Goods Sold 53,190 Gross profit 54, (a) STORES LEDGER RECORD Date Receipts Issues Balance Quantity Price Value Quantity Price Value Quantity Price Value Year 3 1 Sep Balance Sep Sep , , ,940 7 Sep ,369 8 Sep , , Sep , Sep , , , , Sep , Sep , Sep , Sep , , , Sep ,393 Note: rounding may cause some figures to differ; these should have no material effect

26 (b) VEE LIMITED TRADING ACCOUNT FOR SEPTEMBER YEAR 3 Sales: 130 units at 14 each 1, units at 16 each 4,160 5,980 Opening stock 300 Purchases 6,745 7,045 Less Closing stock 2,393 Cost of Goods Sold 4,652 Gross profit 1,328 (d) Date Details Folio Dr Cr Dec Profit and loss GL 1,160 Prepayments GL 80 Photocopying expenses GL 1,240 1,240 1,240 Transfer to profit and loss account of expenditure for the year (e) CHAPTER 18 The Journal 18.2 (a) Date Details Folio Dr Cr Dec Stock GL 22,600 Trading GL 22,600 Stock valuation at 31 December 20-8 transferred to trading account (b) Date Details Folio Dr Cr Dec Profit and loss GL 890 Telephone expenses GL 890 Transfer to profit and loss account of expenditure for the year (c) Date Details Folio Dr Cr Dec Profit and loss GL 23,930 Salaries GL 22,950 Accruals GL ,930 23,930 Transfer to profit and loss account of expenditure for the year Date Details Folio Dr Cr Dec Drawings GL 200 Motoring expenses GL 200 Transfer of private motoring to drawings account (f) Date Details Folio Dr Cr Dec Drawings GL 175 Purchases GL 175 Goods taken for own use by the owner (g) Date Details Folio Dr Cr Dec Profit and loss GL 500 Provision for depreciation - fixtures and fittings GL 500 Depreciation charge for year on fixtures and fittings 24

27 (h) Date Details Folio Dr Cr Dec Disposals GL 5,000 Machinery GL 5,000 Provision for depreciation account machinery GL 3,750 Disposals GL 3,750 Bank CB 2,400 Disposals GL 2,000 VAT GL 400 Profit and loss GL 750 Disposals GL ,900 11,900 Sale of machine no...; profit on sale 750 transferred to profit and loss account CHAPTER 19 Correction of Errors 19.2 (a) error of omission Date Details Folio Dr Cr J Rigby SL 150 Sales GL 150 Sales invoice no... omitted from the accounts. (b) mispost/error of commission Date Details Folio Dr Cr H Price Limited PL 125 H Prince PL 125 (i) Date Details Folio Dr Cr Dec Bad debts written off GL 125 N Marshall SL 125 (c) Correction of mispost cheque no...: to H Price Limited error of principle Account of N Marshall written off as a bad debt - see memo dated Dec Profit and loss GL 125 Bad debts written off GL 125 Transfer to profit and loss account of bad debts for the year Date Details Folio Dr Cr Delivery van GL 10,000 Vehicle expenses GL 10,000 Correction of error vehicle no... invoice no... (j) (d) reversal of entries Date Details Folio Dr Cr Dec Profit and loss GL 100 Provision for bad debts GL 100 Decrease in provision for bad debts 25 Date Details Folio Dr Cr Postages GL 55 Bank CB 55 Postages GL 55 Bank CB Correction of reversal of entries on...

28 (e) compensating error Date Details Folio Dr Cr Purchases GL 100 Purchases returns GL 100 (iv) Stock 1,300 Trading 1,300 (v) Suspense 1,000 Wages 1,000 Correction of under-cast on purchases account and purchases returns account on...(date)... (vi) Printing and stationery 12 Motor expenses 12 (f) error of original entry Errors (ii), (iii) and (v) would have caused the trial balance to disagree. Date Details Folio Dr Cr L Johnson SL 98 Bank CB 98 Bank CB 89 L Johnson SL Correction of error cheque for 89 received on...(date)... (b) Statement of corrected net profit for the year ended 31 January 20-8 Net profit (unadjusted) 34,765 Add: reduction in provision for bad debts 113 closing stock undervalued 1,300 wages overstated 1,000 2,413 37, (a) JOURNAL Details Dr Cr Less: bad debts written off 303 insurance understated 243 rent paid understated Adjusted net profit 36,542 (i) Bad debts written off 303 Debtors 303 Profit and loss 113 Provision for bad debts 113 (c) (ii) Insurance 243 Suspense 243 (iii) Suspense 780 Rent 780 Rent 870 Suspense 870 Dr Suspense Account Cr 20-7/ /20-8 Rent (iii) 780 Insurance (ii) 243 Wages (v) 1,000 Rent (iii) Jan Trial balance difference 667 1,780 1,780 1,650 1,650 26

29 CHAPTER 20 Control Accounts 20.4 (a) SALES LEDGER Dr Arrow Valley Retailers Cr 20-8 p 20-8 p 1 Feb Balance b/d Feb Bank Feb Sales Feb Discount allowed Feb Balance c/d , , Mar Balance b/d (c) Reconciliation of sales ledger control account with debtor balances 1 February February 20-8 p p Arrow Valley Retailers B Brick (Builders) Limited Mereford Manufacturing Company nil Redgrove Restorations Wyvern Warehouse Limited Sales ledger control account 2, , Dr B Brick (Builders) Limited Cr 20-8 p 20-8 p 1 Feb Balance b/d Feb Bad debts written off Dr Mereford Manufacturing Company Cr 20-8 p 20-8 p 1 Feb Balance b/d Feb Sales returns Feb Sales Feb Set-off: purchases ledger Dr Redgrove Restorations Cr 20-8 p 20-8 p 1 Feb Balance b/d Feb Sales returns Feb Sales Feb Balance c/d , , Mar Balance b/d (a) Dr Sales Ledger Control Account Cr 1 Sep Balances b/d 12,000 1 Sep Balances b/d 800 Credit sales 23,150 Sales returns 738 Cash refund 111 Cash discount allowed 1,000 Dishonoured cheque 130 Bad debts written off 1, Sep Balances c/d 120 Cash received from debtors 700 Cheques received from debtors 25, Sep Balances c/d 5,896 35,511 35,511 1 Oct Balances b/d 5,896 1 Oct Balances b/d 120 Dr Wyvern Warehouse Limited Cr 20-8 p 20-8 p 1 Feb Balance b/d Feb Bank Feb Sales Feb Discount allowed Feb Balance c/d Mar Balance b/d (b) Sales ledger debit balances 6,007 Sales ledger control account debit balance 5,896 Difference 111 (b) Dr Sales Ledger Control Account Cr 20-8 p 20-8 p 1 Feb Balances b/d 2, Feb Sales returns Feb Credit sales 1, Feb Cheques received from debtors Feb Cash discount allowed Feb Set-off: purchases ldgr Feb Bad debts written off Feb Balances c/d 1, , , Mar Balances b/d 1, As the difference is the same amount as the cash refund to Mr Green, with the sales ledger debit balances higher, it seems likely that the cash refund has not been recorded on Mr Green's account in the sales ledger. 27