Question bank answers

BUSINESS ACCOUNTS 4th edition Question bank answers sourced from www.osbornebooks.co.uk

Contents chapter answers number page 1 2 2 2 3 3 4 4 5 4 6 6 7 7 8 9 9 9 10 10 11-12 12 13 13 14 16 15 18 16 20 17 21 18 22 19 23 20 25 21 27 22 30 23 32 24 35 25 36 26 38 27 41 28 43 1

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 10,000 1.2 (a) capital 10,000 (b) capital 12,500 (c) liabilities 6,250 (d) assets 17,030 (e) liabilities 5,425 (f) assets 24,003 1.3 (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 20-9 20-9 1 Oct Capital 7,500 4 Oct Machinery 4,000 12 Oct T Richards: loan 1,500 6 Oct Office equipment 2,250 18 Oct Commission received 200 11 Oct Rent paid 400 15 Oct Wages 500 20 Oct Drawings 250 25 Oct Wages 450 (b) Dr Capital Account Cr 20-9 20-9 1 Oct Bank 7,500 Dr Machinery Account Cr 20-9 20-9 4 Oct Bank 4,000 Dr Office Equipment Account Cr 20-9 20-9 6 Oct Bank 2,250 Dr Rent Paid Account Cr 20-9 20-9 11 Oct Bank 400 Dr Tina Richards: Loan Account Cr 20-9 20-9 12 Oct Bank 1,500 Dr Wages Account Cr 20-9 20-9 15 Oct Bank 500 25 Oct Bank 450 Dr Commission Received Account Cr 20-9 20-9 18 Oct Bank 200 Dr Drawings Account Cr 20-9 20-9 20 Oct Bank 250 2.2 20-4 1 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

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 750 6 May Shop fittings 2,000 26 May Sales 550 10 May Rent paid 750 28 May Gordano Giftware 1,250 16 May Wages 1,500 18 May Bristol Supplies Ltd 1,100 24 May Rent paid 750 12 May Sales 1,500 21 May Sales returns 250 28 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 3.2 4 May Bank 750 12 May Gordano Giftware 1,500 26 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 150 7 May Purchases 1,250 18 May Bank 1,100 Dr Rent Paid Account Cr 10 May Bank 750 24 May Bank 750 3

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 20-7 20-7 1 Jul Balance b/d 522.80 14 Jul Cash/discount allowed 522.80 8 Jul Sales 178.00 12 Jul Sales 132.80 4.2 (i) total trade discount net total VAT invoice total (a) 160.00 32.00 128.00 25.60 153.60 (b) 400.00 80.00 320.00 64.00 384.00 (c) 40.00 none 40.00 8.00 48.00 (d) 8,000.00 1,600.00 6,400.00 1,280.00 7,680.00 CHAPTER 5 Balancing Accounts the Trial Balance 5.1 (a) Dr Bank Account Cr 20-0 20-0 1 Feb Capital 500 1 Feb Purchases 150 10 Feb Sales 290 5 Feb Rent paid 50 27 Feb Sales 240 22 Feb Advertising 25 26 Feb Drawings 100 28 Feb Balance c/d 705 1,030 1,030 1 Mar Balance b/d 705 2 Mar Purchases 100 14 Mar J Lock: loan 450 5 Mar Rent paid 50 16 Mar Sales 330 23 Mar Drawings 75 26 Mar Sales 180 29 Mar Advertising 30 31 Mar Balance c/d 1,410 1,665 1,665 1 Apr Balance b/d 1,410 (b) Dr Capital Account Cr 20-0 20-0 31 Mar Balance c/d 500 1 Feb Bank 500 1 Apr Balance b/d 500 (ii) net total cash total after VAT invoice total* discount cash discount (a) 128.00 3.20 124.80 24.96 152.96 (b) 320.00 8.00 312.00 62.40 382.40 (c) 40.00 1.00 39.00 7.80 47.80 Dr Purchases Account Cr 20-0 20-0 1 Feb Bank 150 31 Mar Balance c/d 250 2 Mar Bank 100 250 250 1 Apr Balance b/d 250 (d) 6,400.00 160.00 6,240.00 1,248.00 7,648.00 VAT is added to the total before deduction of cash discount. Dr Rent Paid Account Cr 20-0 20-0 5 Feb Bank 50 31 Mar Balance c/d 100 5 Mar Bank 50 100 100 1 Apr Balance b/d 100 4

Dr Sales Account Cr 20-0 20-0 31 Mar Balance c/d 1,040 10 Feb Bank 290 27 Feb Bank 240 16 Mar Bank 330 26 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 1,990 20-0 20-0 22 Feb Bank 25 31 Mar Balance c/d 55 29 Mar Bank 30 55 55 1 Apr Balance b/d 55 Dr Drawings Account Cr 20-0 20-0 26 Feb Bank 100 31 Mar Balance c/d 175 23 Mar Bank 75 175 175 1 Apr Balance b/d 175 Dr J Lock: Loan Account Cr 20-0 20-0 31 Mar Balance c/d 450 14 Mar Bank 450 5.2 (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 65 5.3 (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

CHAPTER 6 Division of the Ledger Primary Accounting Records 6.1 Purchases Day Book Date Details Invoice Folio Net VAT Gross 20-2 2 Jan T F Day 850.45 850.45 10 Jan B G Moon 1,226.48 1,226.48 14 Jan D S Cox 912.14 912.14 18 Jan T F Day 1,009.63 1,009.63 25 Jan B G Moon 461.92 461.92 28 Jan T F Day 227.39 227.39 30 Jan D S Cox 1,013.27 1,013.27 31 Jan Totals for month 5,701.28 5,701.28 PURCHASES LEDGER Dr T F Day Cr 31 Jan Balance c/d 2,087.47 2 Jan Purchases 850.45 18 Jan Purchases 1,009.63 28 Jan Purchases 227.39 2,087.47 2,087.47 1 Feb Balance b/d 2,087.47 Dr B G Moon Cr 31 Jan Balance c/d 1,688.40 10 Jan Purchases 1,226.48 25 Jan Purchases 461.92 1,688.40 1,688.40 1 Feb Balance b/d 1,688.40 Dr D S Cox Cr 31 Jan Balance c/d 1,925.41 14 Jan Purchases 912.14 30 Jan Purchases 1,013.27 1,925.41 1,925.41 GENERAL LEDGER 1 Feb Balance b/d 1,925.41 Dr Purchases Account Cr 31 Jan Purchases Day Book 5,701.28 6.2 PURCHASES LEDGER Dr C Hills Cr 20-8 20-8 8 Dec Bank 154 1 Dec Balance b/d 154 31 Dec Balance c/d 275 13 Dec Purchases 110 20 Dec Purchases 165 429 429 20-9 20-9 1 Jan Balance b/d 275 Dr L Howe Cr 20-8 20-8 31 Dec Balance c/d 341 1 Dec Balance b/d 275 21 Dec Purchases 66 341 341 20-9 20-9 1 Jan Balance b/d 341 SALES LEDGER Dr K Harris Cr 20-8 20-8 1 Dec Balance b/d 330 16 Dec Bank 594 11 Dec Sales 264 31 Dec Balance c/d 88 15 Dec Sales 88 682 682 20-9 20-9 1 Jan Balance b/d 88 GENERAL LEDGER Dr Bank Account Cr 20-8 20-8 1 Dec Balance b/d 740 8 Dec C Hills 154 16 Dec K Harris 594 15 Dec Printing expenses 20 31 Dec Balance c/d 1,160 1,334 1,334 20-9 20-9 1 Jan Balance b/d 1,160 Dr Printing Expenses Account Cr 20-8 20-8 15 Dec Bank 20 Dr Capital Account Cr 20-8 20-8 1 Dec Balance b/d 641 6

Dr Purchases Account Cr 20-8 20-8 31 Dec Purchases Day Book 310 Dr Sales Account Cr 20-8 20-8 31 Dec Sales Day Book 320 Dr Value Added Tax Account Cr 20-8 20-8 31 Dec Purchases Day Book 31 31 Dec Sales Day Book 32 31 Dec Balance c/d 1 32 32 20-9 20-9 1 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 1,440 472 640 2,560 November 1,520 384 2,800 December 1,680 728 3,120 (b) Dr Value Added Tax Account Cr 20-5 20-5 31 Oct Purchases Day Book 1,440 31 Oct Sales Day Book 2,560 Expenses 472 30 Nov Sales Day Book 2,800 Fixed assets 640 31 Dec Sales Day Book 3,120 30 Nov Purchases Day Book 1,520 Expenses 384 31 Dec Purchases Day Book 1,680 Expenses 728 31 Dec Balance c/d 1,616 8,480 8,480 20-6 20-6 1 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 20-6. 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 20-2 10 Jun Paper Supplies Ltd 2472 400.00 80.00 480.00 11 Jun Severn Traders 8771 141.00 28.20 169.20 12 Jun Computer Services Ltd X 244 163.00 32.60 195.60 13 Jun Paper Supplies Ltd 2491 466.00 93.20 559.20 14 Jun Totals for week 1,170.00 234.00 1,404.00 7

Sales Day Book Date Details Invoice Folio Net VAT Gross No 20-2 10 Jun Wyvern Publishing 1347 520.50 104.10 624.60 12 Jun House of Cards Ltd 1348 248.70 49.74 298.44 13 Jun Lennox Publishers 1349 614.50 122.90 737.40 14 Jun House of Cards Ltd 1350 215.30 43.06 258.36 14 Jun Wyvern Publishing 1351 470.80 94.16 564.96 14 Jun Totals for week 2,069.80 413.96 2,483.76 Dr House of Cards Limited Cr 12 Jun Sales 298.44 4 Jun Sales 258.36 Dr Lennox Publishers Cr 13 Jun Sales 737.40 (b) PURCHASES LEDGER Dr Paper Supplies Limited Cr 10 Jun Purchases 480.00 13 Jun Purchases 559.20 Dr Severn Traders Limited Cr 11 Jun Purchases 169.20 Dr Computer Services Limited Cr 12 Jun Purchases 195.60 GENERAL LEDGER Dr Purchases Account Cr 14 Jun Purchases Day Book 1,170.00 Dr Sales Account Cr 14 Jun Sales Day Book 2,069.80 Dr Value Added Tax Account Cr 14 Jun Purchases Day Book 234.00 14 Jun Sales Day Book 413.96 14 Jun Balance c/d 179.96 413.96 413.96 15 Jun Balance b/d 179.96 SALES LEDGER Dr Wyvern Publishing Cr 10 Jun Sales 624.60 14 Jun Sales 564.96 VAT account has a credit balance of 179.96; 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

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 20-7 20-7 1 Jul Balances b/d 419 3,685 6 Jul Wages 102 2 Jul A Wood 296 9 Jul C Hill 13 211 12 Jul Sales 146 12 Jul T Jarvis 28 1,023 17 Jul Atlas & Co 500 13 Jul Wages 104 23 Jul Bank C 200 19 Jul Postages 21 28 Jul T Phillips 8 317 20 Jul Wages 102 31 Jul Cash C 260 23 Jul Cash C 200 25 Jul W Moore 429 26 Jul Wages 105 31 Jul Bank C 260 31 Jul Balances c/d 71 3,195 8 765 5,058 41 765 5,058 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 20-7 18.26 1 Feb Balance b/d 131.74 1 Feb Cash received 3 Feb Postage 1 10.00 10.00 5 Feb Travelling exp 2 6.50 6.50 9 Feb Cleaner's wages 3 25.00 25.00 12 Feb Stationery 4 7.20 7.20 15 Feb Postage 5 10.00 10.00 18 Feb Travelling exp 6 7.30 7.30 20 Feb Cleaner's wages 7 25.00 25.00 24 Feb Stationery 8 4.75 4.75 26 Feb T B Collins 9 3.90 3.90 27 Feb Miscellaneous 10 4.15 4.15 27 Feb Postage 11 10.00 10.00 28 Feb Cleaner's wages 12 25.00 25.00 8.2 Cash Book (credit side only) 138.80 30.00 13.80 11.95 75.00 4.15 3.90 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 7,060 28 Feb Balance c/d 11.20 150.00 150.00 11.20 1 Mar Balance b/d 138.80 1 Mar Cash received 9

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 20-8 155 1 Nov Balance b/d 195 1 Nov Cash received 4 Nov Postage stamps 20 20 6 Nov Train fare 25 25 10.1 Dr Cash Book (bank columns) Cr 20-0 20-0 1 May Balance b/d 4,200 2 May Cheque no 422 136 14 May Sales 1,414 7 May Cheque no 423 204 21 May Sales 1,240 27 May Cheque no 424 214 28 May Sales 1,160 15 May National Insurance Co 284 31 May Bank service charges 100 31 May Balance c/d 7,076 8,014 8,014 1 Jun Balance b/d 7,076 9 Nov Petrol 15 15 10 Nov Stationery 38 38 12 Nov Bus fares 2 2 15 Nov P Gates 16 16 16 Nov Postage stamps 30 30 18 Nov Motor van repairs 35 35 20 Nov Stationery 47 47 23 Nov Petrol 28 28 25 Nov Misc expenses 17 17 28 Nov Parcel post 19 19 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 6,130 30 Nov Travelling 38 38 330 69 65 78 85 17 16 30 Nov Balance c/d 20 350 350 20 1 Dec Balance b/d 330 1 Dec Cash received 10.2 (a) Dr Cash Book (bank columns) Cr 20-9 20-9 31 May Balance b/d* 270 31 May Mortgage standing order 90 31 May Bank charges 14 31 May Balance c/d 166 270 270 1 Jun Balance b/d 166 * Total of debt entries total of credit entries, ie 716 446 = 270 10

(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 108 274 Less: amounts paid in, not yet recorded on the bank statement V Perch 90 B Tench 48 138 Balance at bank as per bank statement 136 10.4 (a) Balance of statement at 1 October 20-9 1,000 Less: payment credited on statement on 5 October 220 discount received 4 224 Balance of account at 1 October 20-9 776 (b) Balance of account at 31 October 20-9 248 Add: payment made on 30 October 1,235 discount received 65 1,300 Balance of statement at 31 October 20-9 1,548 10.3 (a) Dr Cash Book (bank columns) Cr 20-0 20-0 20 Nov Bank giro credit 246 30 Nov Balance b/d 206 26 Nov Deposit account interest 84 9 Nov Direct debit 18 30 Nov Balance c/d 285 23 Nov Loan interest 391 615 615 1 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 224 692 cheque no 227 27 cheque no 228 91 810 525 Less: amounts paid in, not yet recorded on the bank statement A Palmer 29 J Dixon 17 46 Balance at bank as per bank statement 479 11

CHAPTER 12 Final Accounts BALANCE SHEET AS AT 30 APRIL 20-0 12.1 (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 16,200 12.2 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

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* 8,850 + 350 9,200 Light and heat 520 Rent 8,500 Insurance 240 60 180 18,400 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 190 10,500 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 31,600 13.2 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 150 33,450 Less expenses: Stationery 2,100 150 1,950 Wages 7,600 Rent and rates 2,350 120 2,230 Vehicle expenses 2,000 Light and heat 800 + 45 845 Insurance 850 Telephone 280 + 52 332 Sundry expenses 175 15,982 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 52 + 45 97 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

13.3 (a) Dr Rates Account Cr 20-1/-2 20-1/-2 31 Jan Balance b/d 500 31 Jan Profit and loss account 400 31 Jan Balance c/d 100 500 500 20-2/-3 20-2/-3 1 Feb Balance b/d 100 Dr Rent Receivable Account Cr 20-1/-2 20-1/-2 31 Jan Profit and loss account 300 31 Jan Balance b/d 225 31 Jan Balance c/d 75 300 300 20-2/-3 20-2/-3 1 Feb Balance b/d 75 Dr Insurance Account Cr 20-1/-2 20-1/-2 31 Jan Balance b/d 450 31 Jan Drawings 50 31 Jan Profit and loss account 400 450 450 Dr Wages Account Cr 20-1/-2 20-1/-2 31 Jan Balance b/d 5,200 31 Jan Profit and loss account 5,500 31 Jan Balance c/d 300 5,500 5,500 20-2/-3 20-2/-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 3,800 + 50 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 300 11,807 Less expenses: Insurance 400 Rates 400 Wages 5,500 6,300 Net profit 5,507 14

13.4 (i) Dr Rent Payable Account Cr 20-1/-2 20-1/-2 1 Aug Bank 600 31 Jul Profit and loss account 2,400 4 Nov Bank 600 31 Mar Bank 600 31 Jul Balance c/d 600 2,400 2,400 20-2/-3 20-2/-3 8 Aug Bank 600 1 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 20-1/-2 31 Aug Bank 75 31 Jul Profit and loss account 475 22 Oct Bank 220 31 Jul Balance c/d 90 17 Apr Bank 270 565 565 20-2/-3 20-2/-3 1 Aug Balance b/d 90 Dr Electricity Account Cr 20-1/-2 20-1/-2 17 Oct Bank 310 31 Jul Profit and loss account 1,480 21 Jan Bank 390 10 Apr Bank 360 31 Jul Balance c/d 420 1,480 1,480 20-2/-3 20-2/-3 1 Aug Balance b/d 420 15

CHAPTER 14 Depreciation of Fixed Assets 14.1 (a) (i) Straight-line method Dr Provision for Depreciation Account Machinery Cr 20-7 20-7 31 Dec Balance c/d 1,000 31 Dec Profit and loss account 1,000 20-8 20-8 31 Dec Balance c/d 2,000 1 Jan Balance b/d 1,000 31 Dec Profit and loss account 1,000 2,000 2,000 20-9 20-9 1 Jan Balance b/d 2,000 (ii) Reducing balance method Dr Provision for Depreciation Account Machinery Cr 20-7 20-7 31 Dec Balance c/d 1,200 31 Dec Profit and loss account 1,200 20-8 20-8 31 Dec Balance c/d 2,220 1 Jan Balance b/d 1,200 31 Dec Profit and loss account 1,020 2,220 2,220 20-9 20-9 1 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 6,800 14.2 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 189,600 191,600 Less Closing stock 1,600 Cost of Goods Sold 190,000 Gross profit 110,000 Less expenses: Wages* 45,000 + 1,000 46,000 Rent 31,800 2,000 29,800 General expenses 17,200 Provision for depreciation: fixtures and fittings 19,000 delivery vehicle 2,000 114,000 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

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 6,000 103,000 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 20-8 20-8 30 Jun Disposals account 14,640 1 Jan Balance b/d* 43,920 31 Dec Balance c/d 45,024 31 Dec Profit and loss account 15,744 59,664 59,664 20-9 20-9 1 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 48,000 - - - 9,600 18,000 14,400 11,520 15,744 * Provision for depreciation at 1 January 20-8: 18,000 + 14,400 + 11,520 = 43,920 Transfer to disposals account on 30 June 20-8: 6,000 + 4,800 + 3,840 = 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 25,250 45,750 14.3 Dr Vehicles Account Cr 20-8 20-8 1 Jan Balance b/d 90,000 30 Jun Disposals account 30,000 1 Jan Bank 48,000 31 Dec Balance c/d 108,000 138,000 138,000 20-9 20-9 1 Jan Balance b/d 108,000 Dr Disposal of Motor Vehicles Account Cr 20-8 20-8 30 Jun Vehicles 30,000 30 Jun Provision for dep'n account 14,640 30 Jun Bank 10,000 31 Dec Profit and loss account (loss on sale) 5,360 30,000 30,000 14.4 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

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 96,400 102,800 Less Closing stock 6,800 Cost of Goods Sold 96,000 Gross profit 71,000 Discount received 250 71,250 Less expenses: Discount allowed 380 Rates 4,400 600 3,800 Insurance 1,200 Wages and salaries* 22,000 + 1,000 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 187,000-187,000 Fixtures and fittings 20,000 8,000 12,000 207,000 8,000 199,000 Current Assets Stock 6,800 Debtors 5,880 Prepayment 600 Cash 100 13,380 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 40,750 240,750 Less Drawings 38,000 202,750 15.2 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 340 14,100 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 1,800 600 1,200 Office furniture and equipment 1,600 400 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

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 112,800 450 112,350 137,950 Less Closing stock 27,350 Cost of Goods Sold 110,600 Gross profit 40,150 Less expenses: Wages 12,610 Rent 2,500 500 2,000 Motor expenses 1,240 + 140 1,380 Provision for depreciation: motor vehicle 3,000 equipment 3,150 Bad debt written off 200 Insurance 1,000 + 450 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 250 38,750 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 48,860 19 15.4 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 102,750 113,850 Less Closing stock 12,600 Cost of Goods Sold 101,250 Gross profit 43,155 Rent receivable 960 44,115 Less expenses: Salaries 5,280 + 1,800 7,080 Carriage outwards 2,340 Rates and insurance 2,790 310 2,480 Advertising 1,041 Bad debts written off 240 Increase in provision for bad debts 375 300 75 Provision for depreciation: office equipment 600 shop fittings 660 14,516 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

CHAPTER 16 The Extended Trial Balance 16.1 16.2 20-8 20-9 20-8 20-9 20

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 800 @ 6.00 800 x 6.00 = 4,800 July 700 @ 6.00 100 x 6.00 = 600 September 1,200 @ 7.00 100 x 6.00 = 600 1,200 x 7.00 = 8,400 1,300 9,000 December 100 @ 6.00 700 x 7.00 = 4,900 500 @ 7.00 February 1,000 @ 8.00 700 x 7.00 = 4,900 1,000 x 8.00 = 8,000 1,700 12,900 April 400 @ 7.00 300 x 7.00 = 2,100 1,000 x 8.00 = 8,000 1,300 10,100 May 700 @ 10.00 300 x 7.00 = 2,100 1,000 x 8.00 = 8,000 700 x 10.00 = 7,000 2,000 17,100 (ii) LIFO Date Receipts Issues Balance 20-1/-2 Quantity Price Quantity Price Quantity Price Total June 800 @ 6.00 800 x 6.00 = 4,800 July 700 @ 6.00 100 x 6.00 = 600 September 1,200 @ 7.00 100 x 6.00 = 600 1,200 x 7.00 = 8,400 1,300 9,000 December 600 @ 7.00 100 x 6.00 = 600 600 x 7.00 = 4,200 700 4,800 February 1,000 @ 8.00 100 x 6.00 = 600 600 x 7.00 = 4,200 1,000 x 8.00 = 8,000 1,700 12,800 April 400 @ 8.00 100 x 6.00 = 600 600 x 7.00 = 4,200 600 x 8.00 = 4,800 1,300 9,600 May 700 @ 10.00 100 x 6.00 = 600 600 x 7.00 = 4,200 600 x 8.00 = 4,800 700 x 10.00 = 7,000 2,000 16,600 21 17.2 (a) LIFO Date Receipts Issues Balance 20-9 Quantity Price Quantity Price Quantity Price Total 1 Sep Balance b/d NIL 3 Sep 200 @ 1.00 200 x 1.00 = 200.00 7 Sep 180 @ 1.00 20 x 1.00 = 20.00 8 Sep 240 @ 1.50 20 x 1.00 = 20.00 240 x 1.50 = 360.00 260 380.00 14 Sep 170 @ 1.50 20 x 1.00 = 20.00 70 x 1.50 = 105.00 90 125.00 15 Sep 230 @ 2.00 20 x 1.00 = 20.00 70 x 1.50 = 105.00 230 x 2.00 = 460.00 320 585.00 21 Sep 150 @ 2.00 20 x 1.00 = 20.00 70 x 1.50 = 105.00 80 x 2.00 = 160.00 170 285.00

AVCO Date Receipts Issues Balance 20-9 Quantity Price Quantity Price Quantity Price Total 1 Sep Balance b/d NIL 3 Sep 200 @ 1.00 200 x 1.00 = 200.00 7 Sep 180 @ 1.00 20 x 1.00 = 20.00 8 Sep 240 @ 1.50 20 x 1.00 = 20.00 240 x 1.50 = 360.00 260 x 1.46 = 380.00 14 Sep 170 @ 1.46 90 x 1.46 = 131.40 15 Sep 230 @ 2.00 90 x 1.46 = 131.40 230 x 2.00 = 460.00 320 x 1.85 = 591.40 21 Sep 150 @ 1.85 170 x 1.85 = 314.50 (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. 17.3 Item DW/04 STOCK CARD Date Details Receipts Issues Balance Units Units Units 20-9 1 Sep Balance 12 144 6 Sep Issue note no A237 8 96 4 48 8 Sep Invoice no 784 20 240 24 288 15 Sep Invoice no 847 48 576 72 864 17 Sep Issue note no D534 18 216 54 648 22 Sep Invoice no 984 20 240 74 888 24 Sep Issue note no B631 64 768 10 120 30 Sep Stock loss 2 24 8 96 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 20-0 1 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

18.2 (a) Dr Vehicle Account Cr 20-5/-6 20-5/-6 1 Nov Bank 12,000 31 Oct Balance c/d 12,000 20-6/-7 20-6/-7 1 Nov Balance b/d 12,000 1 Jan Disposals account 12,000 6 Dec Bank 18,000 31 Oct Balance c/d 18,000 30,000 30,000 20-7/-8 20-7/-8 1 Nov Balance b/d 18,000 7 Mar Disposals account 18,000 7 Mar Disposals account 13,500 31 Oct Balance c/d 28,000 (part-exchange allowance) 7 Mar Supatruks Ltd 14,500 (balance due) 46,000 46,000 20-8/-9 20-8/-9 1 Nov Balance b/d 28,000 Dr Provision for Depreciation Account - Vehicle Cr 20-5/-6 20-5/-6 31 Oct Balance c/d 3,000 31 Oct Profit and loss account 3,000 20-6/-7 20-6/-7 1 Jan Disposals account 3,000 1 Nov Balance b/d 3,000 31 Oct Balance c/d 4,500 31 Oct Profit and loss account 4,500 7,500 7,500 20-7/-8 20-7/-8 7 Mar Disposals account 4,500 1 Nov Balance b/d 4,500 31 Oct Balance c/d 7,000 31 Oct Profit and loss account 7,000 11,500 11,500 20-8/-9 20-8/-9 1 Nov Balance b/d 7,000 (b) Date Details Folio Dr Cr 20-7 1 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 550 24,000 24,000 Lorry, registration no... written off in accident. Insurance proceeds 8,450 received. Loss of 550 transferred to profit and loss account. 20-8 7 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 20-9. 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 21,000 23 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 140 420 420 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.)

19.2 (a) Date Details Folio Dr Cr 20-0 30 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 12 30 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 20-0 20-0 30 Apr Trial balance difference 1,300 30 Apr Discount allowed 800 30 Apr Sundry debtors 500 1,300 1,300 30 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 20-0 30 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 12 30 Sep Trial balance difference 1,098 30 Sep Returns inwards account 124 30 Sep Returns outwards account 124 30 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.

(iii) Profit under-stated Profit over-stated 1. 248 2. 47 3. 225 4. 850 5. 45 CHAPTER 20 Control Accounts 20.1 Dr Sales Ledger Control Account: Section 1 Cr 20.. 20.. 1 Jan Balances b/d 84,200 1 Jan Balances b/d 190 Sales for year 678,672 Cash received from debtors 697,384 31 Dec Balances c/d 281 Sales returns 3,475 Discount allowed 2,760 Bad debts written off 3,660 31 Dec Balances c/d 55,684 763,153 763,153 20.. 20.. 1 Jan Balances b/d 55,684 1 Jan Balances b/d 281 20.2 (a) Dr Bought Ledger (Purchases Ledger) Control Account Cr 20-7 20-7 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 220 30 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 20.. 20.. 1 Jan Balances b/d 136,200 1 Jan Balances b/d 1,260 Sales for year 497,285 Cash received from debtors 526,294 31 Dec Balances c/d 1,328 Sales returns 1,226 Discount allowed 887 Bad debts written off 1,284 31 Dec Balances c/d 103,862 634,813 634,813 20.. 20.. 1 Jan Balances b/d 103,862 1 Jan Balances b/d 1,328 25

20.3 Dr Sales Ledger Control Account Cr 20-0 20-0 1 Apr Balances b/d 95,617 1 Apr Balances b/d 613 Credit sales 759,348 Sales returns 3,549 30 Apr Balances c/d 161 Cash received from debtors 703,195 Discount allowed 25,355 Bad debts written off 5,123 30 Apr Balances c/d 117,291 855,126 855,126 1 May Balances b/d 117,291 1 May Balances b/d 161 20.4 Dr Sales Ledger Control Account Cr 20-0 20-0 1 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 9,564 31 May Balances c/d 80 Discount allowed 382 Bad debts 250 Sales returns 200 Set-off 160 31 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 20-0 20-0 1 Apr Balances b/d 782 1 Apr Balances b/d 78,298 Purchases returns 4,581 Credit purchases 621,591 Cash paid to creditors 612,116 30 Apr Balances c/d 329 Discount received 8,570 30 Apr Balances c/d 74,169 700,218 700,218 1 May Balances b/d 329 1 May Balances b/d 74,169 Dr Purchases Ledger Control Account Cr 20-0 20-0 1 May Balances b/d 53 1 May Balances b/d 13,086 Cheques paid to creditors 10,532 Credit purchases 21,555 Discount received 532 31 May Balances c/d 116 Purchases returns 908 Set-off 160 31 May Balances c/d 22,572 34,757 34,757 1 Jun Balances b/d 116 1 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

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 1,500 21.3 (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 720 58,500 Less Liabilities Creditors 1,330 Expenses owing 70 Loan from father 5,000 6,400 Capital at 1 May 20-7 52,100 21.2 (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 450 11,655 Less Liabilities Creditors 8,505 Capital at 1 April 20-8 3,150 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 20-9 3,149 (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 790 60,600 Less Liabilities Creditors 1,450 Expenses owing 50 Loan from father 4,000 5,500 Capital at 30 April 20-8 55,100 (c) (d) net profit or loss for the year = closing capital opening capital + drawings capital introduced 55,100 52,100 + 8,400 ( 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 20-8 3,150 Add Additional capital 500 3,650 Less Drawings 2,250 1,400 Profit for year (missing figure) 1,749 Capital at 31 March 20-9 3,149 27 (e) expenses matched to the financial year, ie the accruals concept

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 120 20,130 Less Liabilities Creditors 2,575 Accrued electricity 485 Bank overdraft 2,025 5,085 Capital at 30 June 20-4 15,045 Dr Sales Ledger Control Account Cr 20-4/-5 20-4/-5 1 Jul Balances b/d 4,250 Bank receipts 22,820 Sales* 35,315 Cash receipts (see below) 11,820 30 Jun Balances c/d 4,925 39,565 39,565 20-5/-6 20-5/-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 20-4/-5 Payments to creditors 18,682 1 Jul Balances b/d 2,575 30 Jun Balances c/d 3,520 Purchases* 19,627 22,202 22,202 20-5/-6 20-5/-6 1 Jul Balances b/d 3,520 Dr Electricity Control Account Cr 20-4/-5 20-4/-5 Bank 1,825 1 Jul Balance b/d 485 30 Jun Balance c/d 520 30 Jun Profit and loss account* 1,860 2,345 2,345 20-5/-6 20-5/-6 1 Jul Balance b/d 520 Dr Rent and Rates Control Account Cr 20-4/-5 20-4/-5 1 Jul Balance b/d 280 30 Jun Profit and loss account* 2,290 Bank 2,350 30 Jun Balance c/d 340 2,630 2,630 20-5/-6 20-5/-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% 600 11,460 Net profit 3,338 BALANCE SHEET AS AT 30 JUNE 20-5 Fixed Assets Cost Dep'n to date Net Fixtures 1,800 180 1,620 Motor van 2,400 600 1,800 4,200 780 3,420 Current Assets Stock 12,790 Debtors 4,925 Prepayment (rates) 340 Bank 1,038 Cash 210 19,303 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

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) 91,195 103,595 Less Closing stock ( 12,400 + 25%) 15,500 Cost of Goods Sold 88,095 Gross profit (25% of sales) 29,365 Discount received 560 29,925 Less expenses: Discount allowed 720 Wages 12,680 Rent, rates and electricity 8,950 + 340 290 + 260 520 8,740 Bad debts written off 180 Provision for depreciation: fixtures and fittings 1,600 motor van 1,050 Provision for bad debts 260 25,230 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 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) 114,260 30 Jun Balances c/d 5,200 120,360 120,360 20-7/-8 20-7/-8 1 Jul Balances b/d 5,200 Dr Purchases Ledger Control Account Cr 20-6/-7 20-6/-7 Discount received 560 1 Jul Balances b/d 3,050 Bank payments Purchases 91,195 (missing figure) 89,035 30 Jun Balances c/d 4,650 94,245 94,245 20-7/-8 20-7/-8 1 Jul Balances b/d 4,650 Dr Cash Book Summary Cr 20-6/-7 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 4,200 30 Jun Balance c/d 5,495 120,360 120,360 20-7/-8 20-7/-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. 21.6 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

CHAPTER 22 Club and Society Accounts 22.1 (a) MUSIC SOCIETY Estimated Receipts and Payments Account for the year ending 31 August 20-1 20-0/-1 20-0/-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) 3,000 31 Aug Balance c/d 2,410 9,000 9,000 20-1/-2 20-1/-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 1,200 300 900 Current Assets Bank 2,410 NET ASSETS 3,310 REPRESENTED BY Accumulated fund Add surplus of income over expenditure for year 3,310 3,310 22.2 GREENROOM SOCIAL CLUB INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 30 JUNE 20-- Income Subscriptions 22,410 180 72 + 225 22,383 Games' fees 270 27 243 Drink machine receipts 936 23,562 Less Expenditure Wages 15,300 + 108 15,408 Secretary's salary 2,700 Rent of hall 900 Printing and postage 2,115 180 1,935 Loss on dance 198 Provision for depreciation: furniture 3,240 3,105 135 21,276 Surplus of income over expenditure 2,286 BALANCE SHEET AS AT 30 JUNE 20-- Fixed Assets Cost Dep'n to date Net Furniture 3,240 135 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 108 207 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