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1.1 Good financial control is important to ensure the continued profitability and success of the business. Also to control costs and cash flow.
1.2X Profit is obtained by selling goods for more than the purchase price less expenses incurred in selling the goods.
1.3 (a) Trading and Profit and Loss Account (b) Balance Sheet
1.4X A sole trader may incur the following drawbacks whilst trading alone:Liable for all the debts of the business If a loss is made he/she bears all the losses May lack expertise in certain areas Often has to work long hours
Positive outcomes:Independent and responsible for all decision making If successful and a profi t is made they keep all the profi ts Able to offer personal service to customers
(Any one from the above would be acceptable as an answer)
1.5 The rules which lay down the way in which the activities of a business are recorded and the financial statements, i.e. Trading and Profit and Loss Account and Balance Sheet prepared.
1.6 (a) Going concern concept when a business is assumed to continue for a long time.
(b) Accrual concept where profit is the difference between revenues and expenses in a specific period and not the difference between cash received and cash paid.
(c) Consistency concept applying the same method of accounting when dealing with specific items such as depreciation and in stock valuation.
(d) Prudence concept an accountant is always very careful not to over value specific assets such as stock or machinery etc., and to identify any potential liabilities. It is their duty to prepare the accounts as accurately as possible to give a fair figure of profit.
1.7X (a) Materiality (b) Business entity (c) Money measurement (d) Prudence
1.8 Employees would be interested in their employers financial results for the following reasons:
The ability to pay wages and salaries Secure employment with the opportunity to progress within the business Continued profi tability Sound cash fl ow position Sales maintained and increasing Business viable for the forthcoming period Healthy customer base
(Any three of the above would be acceptable as an answer)
Chapter 1: Introduction to accounting principles
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2.1 (a) Purchases - asset (b) Office equipment - asset (c) Bank loan - liability (d) Cash in hand - asset (e) Motor vehicle - asset (f) Loan from financial company - liability
2.2X Wrong: Assets Liabilities Money owing to bank Motor van Stock of goods
2.3 Account to be Debited Account to be Credited
(a) Cash Capital
(b) Bank Cash
(c) Purchases Cash
(d) Of ce Machinery Bank
(e) Stationery Cash
2.4X Account to be debited Account to be credited (a) Bank Capital (b) Purchases Cash (c) Motor car Bank (d) Cash Uncle Joe loan (e) Motor expenses Cash (f) Computer equipment Cash
2.5 Max Morgan
Bank Account
Jan-01 Capital 30,000 Jan-05 Purchases 2,770
Jan-15 Sales 500 Jan-07 S/H Van 4,800
Jan-27 Computer Equipment
2,100
Jan-30 Purchases 1,090
Capital Account
Jan-01 Bank 30,000
Purchases Account
Jan-05 Bank 2,770
Jan-30 Bank 1,090
Van Account
Jan-07 Bank 4,800
Cash Account
Jan-09 Sales 680 Jan-10 Of ce Furniture 110
Jan-29 Sales 325 Jan-22 Motor Expenses 92
Chapter 2: Double entry for cash transactions
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Sales Account
Jan-09 Cash 680
Jan-15 Bank 500
Jan-29 Cash 325
Office Furniture Account
Jan-10 Cash 110
Motor Expenses Account
Jan-22 Cash 92
Computer Equipment Account
Jan-27 Bank 2,100
2.6X
Jane Mellor Cash Account
May 1 Capital 22,000 May 3 Bank 20,000
May 20 Sales 328 May 22 Stationery 72
Capital Account
May-01 Cash 22,000
Bank Account
May 3 Cash 20,000 May 7 Rent 500
May 25 Sales 560 May 10 Purchases 1,700
May 15 Display units 400
May 23 Purchases 400
May 31 S/H Van 3,000
Rent Account
May 7 Bank 500
Purchases Account
May 10 Bank 1,700
May 23 Bank 400
Display Units Account
May 15 Bank 400
Sales Account
May 20 Cash 328
May 25 Bank 560
Stationery Account
May 22 Cash 72
Van Account
May 31 Bank 3,000
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3.1 Account to be Debited Account to be Credited(a) Purchases P. Hart
(b) Cash Sales
(c) Motor Car Morgan Motors
(d) Purchases Cohens Ltd
(e) P. Hart Purchase Returns
(f) H. Perkins Sales
(g) Bank Sales
(h) Cash Offi ce Furniture
3.2X Account to be debited Account to be credited (a) Computer equipment J. Kershaw (b) Stationery Cash (c) Purchases J. Leung (d) Daswami & Co Sales (e) Purchases Bank (f) Sales returns Daswani & Co (g) Cash Sales (h) J. Leung Purchase Returns
3.3 Kendrick Products
Cash Account
Jan-01 Capital 20,000 Jan-05 Bank 18,000
Jan-24 Stationery 45
Capital Account
Jan-01 Cash 20,000
Purchases Account
Jan-02 T. Peters 2,543
Jan-07 J. Leigh 349
Jan-09 Bank 592
T. Peters Account
Jan-18 Purchase Returns 160 Jan-02 Purchases 2,543
Jan-26 Bank 2,383
Bank Account
Jan-05 Cash 18,000 Jan-09 Purchases 592
Jan-26 T. Peters 2,383
J. Leighs Account
Jan-07 Purchases 349
Sales Account
Jan-16 P. Lamond 210
Jan-26 D. Gurkan 1,008
P. Lamond Acccount
Jan-16 Sales 210 Jan-30 Sales Returns 60
Purchase Returns Account
Jan-18 T. Peters 160
Chapter 3: Double entry for credit transactions
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Stationery Account
Jan-24 Cash 45
D. Gurkan Account
Jan-26 Sales 1,008
Sales Returns Account
Jan-30 P. Lamond 60
Motor Van Account
Jan-31 Harper Motors Ltd 5,250
Harper Motors Ltd Account
Jan-31 Motor Van 5,250
3.4X Mark & Co
Bank Account
Apr 1 Capital 40,000 Apr 14 Purchases 2,300
Apr 28 C. Chang 950
Apr 30 Ash Car Sales 5,400
Capital Account
Apr 01 Bank 40,000
Purchases Account
Apr 3 E. Shah 845
Apr 5 C. Chang 950
Apr 14 Bank 2,300
Apr 20 E. Shah 920
E. Shah Account
Apr 16 Purchase returns 72 Apr 03 Purchases 845
Apr 20 Purchases 920
C. Chang Account
Apr 28 Bank 950 Apr 05 Purchases 950
Motor Van Account
Apr 09 Ash Car Sales 10,400
Ash Car Sales Account
Apr 30 Bank 5,400 Apr 09 Motor Van 10,400
Sales Account
Apr 12 Naik Bros 147
Apr 23 Cash 369
Apr 29 Curtis & Co 420
Naik Bros Account
Apr 12 Sales 147
Purchase Returns Accounts
Apr 16 E. Shah 72
Cash Account
Apr 23 Sales 369 Apr 26 Motor Expenses 40
Curtis & Co Account
Apr 29 Sales 420
Motor Expenses Account
Apr 26 Cash 40
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4.1
Capital
May-01 Bank 2,500
Bank
May-01 Capital 2,500 May-12 K Gibson 76
May-09 C Bailey 250 May-12 D Ellis 370
May-10 H Spencer 150 May-31 C Mendez 87
May-31 Balance c/d 2,367
2,900 2,900
Jun-01 Balance b/d 2,367
Cash
May-06 Sales 500 May-08 Rent 120
May-15 Stationery 60
May-19 Rent 120
May-31 Balance c/d 200
500 500
Jun-01 Balance b/d 200
Rent
May-08 Cash 120 May-31 Balance c/d 240
May-19 Cash 120
240 240
Jun-01 Balance b/d 240
Stationery
May-15 Cash 60
Purchases
May-02 D Ellis 540 May-31 Balance c/d 1,082
May-02 C Mendez 87
May-02 K Gibson 76
May-18 D Ellis 145
May-18 C Mendez 234
1,082 1,082
Jun-01 Balance b/d 1,082
Sales
May-31 Balance c/d 1,496 May-04 C Bailey 430
May-04 B Hughes 62
May-04 H Spencer 176
May-06 Cash 500
May-25 C Bailey 90
May-25 B Hughes 110
May-25 H Spencer 128
1,496 1,496
Jun-01 Balance b/d 1,496
Chapter 4: Balancing of accounts and preparation of a Trial Balance
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H Spencer
May-04 Sales 176 May-10 Bank 150
May-25 Sales 128 May-31 Balance c/d 154
304 304
Jun-01 Balance b/d 154
D Ellis
May-12 Bank 370 May-02 Purchases 540
May-31 Balance c/d 315 May-18 Purchases 145
685 685
Jun-01 Balance b/d 315
C Mendez
May-31 Bank 87 May-02 Purchases 87
May-31 Balance c/d 234 May-18 C Mendez 234
234 234
Jun-01 Balance b/d 234
K Gibson
May-12 Bank 76 May-02 Purchases 76
C Bailey
May-04 Sales 430 May-09 Bank 250
May-25 Sales 90 May-31 Balance c/d 270
520 520
Jun-01 Balance b/d 270
B Hughes
May-04 Sales 62 May-31 Balance c/d 172
May-25 Sales 110
172 172
Jun-01 Balance b/d 172
Trial Balance as at 31 May 2010
Dr
Cr
Capital 2,500
Bank 2,367
Cash 200
Rent 240
Stationery 60
Purchases 1,082
Sales 1,496
H Spencer 154
D Ellis 315
C Mendez 234
C Bailey 270
B Hughes 172
4,545 4,545
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4.2X (a)
Bank Account
August 1 Capital 22,000 August 1 Rent 1,800
August 14 Sales 980 August 7 Shop fittings 3,230
August 20 Sales 1,300 August 7 Purchases 5,000
August 28 Sales 2,000 August 9 Cash 1,000
August 30 Salaries 2,100
August 30 Balance c/d 13,150
26,280 26,280
Sept 1 Balance b/d 13,150
Cash Account
August 9 Bank 1,000 August 9 Stationery 163
August 16 Sundry expenses 28
August 30 Balance c/d 809
1,000 1,000
Sept 1 Balance b/d 809
Sales Account
August 30 Balance c/d 4,280 August 1 Bank 980
August 20 Bank 1,300
August 28 Bank 2,000
4,280 4,280
Sept 1 Balance b/d 4,280
Purchases Account
August 7 Bank 5,000 August 30 Balance c/d 10,700
August 10 Book Supplies 4,200
August 25 Delta Books 1,500
10,700 10,700
September 1 balance b/d 10,700
Shop Fittings Account
August 7 Bank 3,230
Capital Account
August 1 Bank 22,000
Rent Account
August 1 Bank 1,800
Stationery Account
August 9 Cash 163
Sundry Expenses Account
August 16 Cash 28
Salaries Account
April 30 Bank 2,100
Book Supplies Accounts
August 10 Purchases 4,200
Delta Books Account
August 25 Purchases 1,500
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4.2X (b)
Jenny Moore Trial Balance as at 31 August 2010
Dr
Cr
Bank 13,150
Cash 809
Sales 4,280
Purchases 10,700
Shop Fittings 3,230
Capital 22,000
Rent 1,800
Stationery 163
Sundry expenses 28
Salaries 2,100
Book Supplies 4,200
Delta Books 1,500
31,980 31,980
4.3
Bank
(1) Capital 15,000 (9) Rent 500
(30) L Clark 440 (11) Rates 190
(30) K Allen 76 (27) Bowman Furnishers 532
(27) Howe Homes 460
(27) W Hunt 2,070
(28) Motor Vehicles 3,000
(30) Bates Motors 5,000
(30) Balance c/d 3,764
15,516 15,516
(1) Balance b/d 3,764
Capital
(30) Balance c/d 15,000 (1) Bank 15,000
(1) Balance b/d 15,000
Howe Homes
(27) Bank 460 (3) Purchases 460
J Bond
(17) Purchases returns 60 (3) Purchases 620
(30) Balance c/d 780 (20) Purchases 220
840 840
(1) Balance b/d 780
Rent
(9) Bank 500 (30) Balance c/d 500
(1) Balance b/d 500
L Clark
(12) Sales 480 (23) Sales returns 40
(30) Bank 440
480 480
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R Gee
(12) Sales 1,170 (30) Balance c/d 1,170
(1) Balance b/d 1,170
Purchses Returns
(30) Balance c/d 88 (17) Bowman Furnishers 28
(17) J Bond 60
88 88
(1) Balance b/d 88
Motor Vehicles
(25) Bates Motors 5,000 (30) Balance c/d 8,000
(28) Bank 3,000
8,000 8,000
(30) Balance b/d 8,000
Stationery
(29) Cash 56 (30) Balance c/d 56
(30) Balance b/d 56
Purchases
(3) Bowman Furnishers 320 (30) Balance c/d 3,930
(3) Howe Homes 460
(3) W Hunt 1,800
(3) J Bond 620
(20) J Bond 220
(20) W Hunt 270
(20) Bowman 240
3,930 3,930
(1) Balance b/d 3,930
Bowman Furnishers
(17) Purchases returns 28 (3) Purchases 320
(27) Bank 532 (20) Purchases 240
560 560
W Hunt
(27) Bank 2,070 (3) Purchases 1,800
(20) Purchases 270
2,070 2,070
Sales
(30) Balance c/d 2,401 (7) Cash 480
(12) L Clark 480
(12) K Allen 96
(12) R Gee 1,170
(26) Cash 175
2,401 2,401
(1) Balance b/d 2,401
Rates
(11) Bank 190 (30) Balance c/d 190
(1) Balance b/d 190
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K Allen
(12) Sales 96 (23) Sales returns 20
(30) Bank 76
96 96
Wages
(14) Cash 400 (30) Balance c/d 400
(1) Balance b/d 400
Sales Returns
(23) K Allen 20 (30) Balance c/d 60
(23) L Clark 40
60 60
(30) Balance b/d 60
Bates Motors
(30) Bank 5,000 (25) Motor vehicles 5,000
Cash
(7) Sales 480 (14) Wages 400
(26) Sales 175 (29) Stationery 56
(30) Balance c/d 199
655 655
(1) Balance b/d 199
Trial Balance as at 30 April 2010
Dr
Cr
Bank 3,764
Purchases 3,930
Capital 15,000
J Bond 780
Sales 2,401
Rent 500
Rates 190
R Gee 1,170
Wages 400
Purchases returns 88
Sales returns 60
Motor vehicles 8,000
Stationery 56
Cash 199
18,269 18,269
4.4 (a) Capital credit
(b) Sales credit
(c) Stationary debit
(d) Cash debit
(e) T Khan (creditor) credit
(f) Machinery debit
(g) Rent debit
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(h) D Allen (debtor) debit
(i) Bank loan credit
( j) Purchases debit
4.5 Trial Balance of P Brown as at 31 May 2010
Dr
Cr
Capital 20,000
Drawings 7,000
General expenses 500
Sales 38,500
Purchases 29,000
Debtors 6,800
Creditors 9,000
Bank 15,100
Cash 200
Plant and equipment 5,000
Heating and lighting 1,500
Rent 2,400
67,500 67,500
4.6 Trial Balance of S Higton as at 30 June 2010
Dr
Cr
Capital 19,956
Sales 119,439
Stationery 1,200
General expenses 2,745
Motor expenses 4,476
Cash at the bank 1,950
Stock 1 July 2009 7,668
Wages and salaries 9,492
Rent and rates 10,500
Office equipment 6,000
Purchases 81,753
Heating and lighting 2,208
Rent received 2,139
Debtors 10,353
Drawings 4,200
Creditors 10,230
Motor vehicle 7,500
Interest received 1,725
Insurance 3,444
153,489 153,489
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4.7X Trial Balance of Ms Anita Hall as at 31 December 2010
Dr
Cr
Plant and machinery 21,450
Motor vehicles 26,000
Premises 80,000
Wages 42,840
Purchases 119,856
Sales 179,744
Rent received 3,360
Telephone, printing and stationery 3,600
Creditors 27,200
Debtors 30,440
Bank overdraft 2,216
Capital 131,250
Drawings 10,680
General Expenses 3,584
Lighting and heating 2,960
Motor expenses 2,360
Motor vehicle
343,770 343,770
4.8X (a) Error of principle
(b) Error of commission
(c) Error of omission
(d) Error of original entry
(e) Complete reversal of entries
(f) Error of principle
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5.1
(a) C BlackCurzon Road
Stockport
INVOICE No 947TDate: 1 March 2011To:
Your Order No. 1697
400.00
470.00
94.0020,000 coils sealing tape x 4.70 per 1,000
180.0040,000 sheets A5 paper x 4.50 per 1,000
126.0030,000 sheets A4 paper x 4.20 per 1,000
70.00 VAT at 17.5%
J Booth89 Andrew LaneStockport
VAT Reg No. 542 4483 95
(b)J Booth's Books
C Black
2011
01-Mar Purchases 470
C Black's BooksJ Booth
2011
01-Mar Sales 470
5.2X (a) & (b) & (c)
2010 Name of Customer Net VAT Total
Jan 2 D Woolham & Co 230.00 40.25 270.25
Jan 6 C Crawford 348.00 60.90 408.90
Jan 7 S Brocklehurst 1,980.00 346.50 2,326.50
Jan 9 L Price & Partners 520.00 91.00 611.00
Jan 13 D Woolham & Co 56.00 9.80 65.80
Jan 18 L Price & Partners 200.00 35.00 235.00
Jan 21 C Crawford 340.00 59.50 399.50
Jan 24 C Crawford 44.00 7.70 51.70
Jan 29 S Brocklehurst 846.00 148.05 994.05
Jan 31 L Price & Partners 722.00 126.35 848.35
5,286.00 925.05 6,211.05
Chapter 5: Value Added Tax
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5.3
(a) Cost of 22 reams of paper at 3.75 82.50
Input VAT is 17.5% 82.50 17.5 ____ 100 14.44
96.94
Customer Charged 235.00 including VAT
Amount before VAT is added, 235 100 ______ 117.5 200.00
Therefore, output VAT is 35.00
Amount of VAT due to HMRC, 35.00 14.44 20.56
(b) Net Amount VAT Total
40.00 7.00 47.00
2.00 0.35 2.35
53.28 9.32 62.60
3.20 0.56 3.76
5.4
(a) Ivy & Co
Dr VAT Account Cr
2010 2010
Apr-30 Purchases Day Book 8,750 Apr-30 Sales Day Book 9,205
May-31 Purchases Day Book 7,350 May-31 Sales Day Book 8,400
Jun-30 Purchases Day Book 9,625 Jun-30 Sales Day Book 10,500
Jun-30 Balances c/d 2,380 28,105
28,105
Jul-01 Balance b/d 2,380
(b) The outstanding balance of 2,380 is the amount of VAT due to HMRC for the quarter ending 30th June 2010.
When Ivy & Co pays this amount to HMRC this will clear the amount in the VAT account.
5.5X
Dr VAT Account Cr
2010 2010
Oct 31 Purchases Day Book 6,580 Oct 31 Sales Day Book 13,125
Nov 30 Purchases Day Book 6,895 Nov 30 Sales Day Book 10,850
Dec 31 Purchases Day Book 9,100 Dec 31 Sales Day Book 11,900
Dec 31 Balances c/d 13,300
35,875 35,875
Jan 01 Balance b/d 13,300
(b) All business records must be kept for 6 years.
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6.1 (a) Remittance advice a document which accompanies payments by cheque or via BACS and gives details of the payment made.
(b) Statement this is normally sent to purchasers at the end of each month and it states the amount owing to the supplier at the end of that particular month.
(c) Credit note - a document sent to a customer showing allowance given by supplier in respect of unsatisfactory goods. Usually printed in red to distinguish it from an invoice.
(d) Invoice a document prepared by the seller and sent to the purchaser whenever a business buys goods or services on credit. It gives details of the supplier and the customer, the goods purchased and their price.
6.2 (a) Purchase order
(b) Invoice
(c) Statement
(d) Remittance advice
6.3X Statement of Account to John Ashley Ltd
Dr Cr Balance
May 1 Balance b/forward 101.50
May 2 Invoice No. 7821 43.75 145.25
May 8 Invoice No. 7955 35.00 180.25
May 17 Credit Note No. 304 10.20 170.05
May 23 Invoice No. 8204 74.50 244.55May 28 Cheque 51.50 193.05
The amount outstanding by John Ashley Ltd is 193.05
6.4X (a) Contents of an invoice - refer to text section 6.3
Contents of a credit note - refer to text section 6.4
(b) An invoice is used when a supplier has provided goods and/or services to a customer and wishes to inform them how much is owed.
A credit note is issued by the supplier to 'credit' the buyer in respect of unsatisfactory goods returned.
Chapter 6: Business documentation
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7.1 Newton Data Systems
Type of expenditure Reason(a) Revenue Use up in the short term
(b) Capital Adds to value of computer equipment
(c) Revenue Used up in the short term
(d) Revenue Used up in the short term
(e) Capital Adds to the value of the computer
(f) Question is not clear
(1) If spent on improving building Construction Capital
(2) If spent on extra wages for Security guards Revenue
Adds to the value of xed assets
Used up in the short term
7.2 Cairns Engineering CoCapital Revenue
(a) New stationery and brochures - 411
(b) New pickup truck 18,000 -
(c) New lathe 5,200 -
(d) Delivery costs - lathe 200 -
(e) Electricity - wiring- electricity costs
1,800-
-2,100
(f) Wages - Re: Improvements- Other
20,000-
-45,000
45,200 47,511
Brief description of capital and revenue expenditure - see text
7.3X (a) (i) Capital
(ii) Capital
(iii) Capital
(iv) Revenue
(b) (i) Expenses would be too high and net profit too low
(ii) The value of the fixed assets in the balance sheet would be too low.
Chapter 7: Capital and revenue expenditure
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7.4 (a) (i) Capital expenditure
(ii) Capital expenditure
(iii) Revenue expenditure
(iv) Capital receipt
(v) Revenue expenditure
(vi) Revenue receipt
(vii) Revenue expenditure
(b) It is important to distinguish between capital and revenue expenditure because incorrect treatment of expenditure would result in profits being affected and the balance sheet position becoming distorted.
If capital expenditure is incorrectly treated as revenue expenditure then the net profit will be understated and the assets in the balance sheet undervalued. If revenue expenditure is incorrectly treated as capital expenditure then the net profit would be overstated and the balance sheet position would be overvalued.
7.5X Capital (a), (c), (f)
Revenue (b), (d), (e), (g)
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Chapter 8: Books of original entry and ledgers Sales day book and sales ledger including VAT
8.1 (a) Sales day book / sales ledger / personal account (b) Cash book / general ledger / nominal account (c) Purchases day book / purchases ledger / personal account (d) Cash book / general ledger / nominal account (e) Sales returns day book / sales ledger / personal account (f) Purchases returns day book / purchases ledger / personal account
8.2X (a) (i) Purchase day book: purchase invoices
(ii) Sales returns day book: sales credit notes
(iii) Cash book: cheques received, cheques paid out, cash receipts and cash payments
(iv) Sales day book: sales invoices
(v) Purchase returns day book: purchase credit notes
(b) Personal accounts: contain the accounts of businesses and people i.e. debtors and creditors.
Impersonal accounts: contain the other accounts, divided between real and nominal accounts.
Real accounts: are accounts in which fixed assets and stock are recorded, such as machinery, property, fixtures and fittings.
Nominal accounts: record expenses, income and capital.
8.3 Sales Day Book Date Details Folio Goods VAT Total2010 Nov-02 T Bates 186.00 32.55 218.55Nov-03 D Cope 166.00 29.05 195.05Nov-09 F Chan 12.00 2.10 14.10Nov-11 T Bates 54.00 9.45 63.45Nov-13 B Ho 66.00 11.55 77.55Nov-18 D Cope 32.00 5.60 37.60Nov-23 M Saka & Sons 20.00 3.50 23.50Nov-30 F Chan 320.00 56.00 376.00
856.00 149.80 1005.80
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Sales Ledger
Dr T Bates Account Cr
Nov-02 Sales 218.55Nov-11 Sales 63.45
Dr D Cope Account CrNov-03 Sales 195.05Nov-18 Sales 37.60
Dr F Chan Account CrNov-09 Sales 14.10Nov-30 Sales 376.00
Dr B Mo Account CrNov-13 Sales 77.55
Dr M Saka & Sons Account CrNov-23 Sales 23.50
General Ledger
Dr Sales Account CrNov-30 Credit sales for the month 856.00
Dr VAT Account Cr
Nov-30 Sales day book: VAT 149.80
8.4X Sales Day Book Date Details Folio Goods VAT Total2011Jul 1 Hall Products 520.00 91.00 611.00Jul 5 Ash & Co 62.00 10.85 72.85Jul 8 K. Meakin 18.00 3.15 21.15Jul 14 A. Ballearic 110.00 19.25 129.25Jul 19 Hall Products 880.00 154.00 1,034.00Jul 26 G. Huang 126.00 22.05 148.05Jul 28 A. Ballearic 42.00 7.35 49.35Jul 31 J. Stead 98.00 17.15 115.15
1,856.00 324.80 2,180.80
Sales Ledger
Dr Hall Products Account Cr
Jul 1 Sales 611.00Jul 19 Sales 1,034.00
Dr Ash & Co Account CrJul 5 Sales 72.85Dr K. Meakin Account CrJul 8 Sales 21.15Dr A. Ballearic Account CrJul 14 Sales 129.25Jul 28 Sales 49.35
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Dr G. Huang Account CrJul 26 Sales 148.05
Dr J Stead Account CrJul 31 Sales 115.15
General Ledger
Dr Sales Account CrJul 31 Credit sales for the month 1,856.00
Dr VAT Account Cr
Jul 31 Sales day book : VAT 324.80
8.5 It is important to check sales invoices prior to sending them out to customers for the following reasons:
To ensure the customers order number or reference is shown.To check that the correct quantity of goods has been invoiced.To ensure the goods/services are invoiced at the right place.To check all the calculations and extensions.
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Answers
9.1 White Bros
Purchases Day Book
Date Details Goods VAT Total
2010
May-01 Bould & Co 104.00 18.20 122.20
May-07 Harlow & Brown 48.00 8.40 56.40
May-16 J Adams Ltd 234.00 40.95 274.95
May-23 Bould & Co 170.00 29.75 199.75
May-26 J H Products 320.00 56.00 376.00
May-28 Harlow & Brown 62.00 10.85 72.85
May-31 P Yeung Ltd 446.00 78.05 524.05
1384.00 242.20 1626.20
Purchase Ledger
Dr Bould & Co Account Cr
May-01 Purchases 122.20
May-23 Purchases 199.75
Dr Harlow and Brown Account Cr
May-07 Purchases 56.40
May-28 Purchases 72.85
Dr J Adam Ltd Account Cr
May-16 Purchases 274.95
Dr J H Products Account Cr
May-26 Purchases 376.00
Dr P Yeung Account Cr
May-31 Purchases 524.05
General Ledger
Dr Purchases Account Cr
May-31 Credit purchases for the month
1384.00
Dr VAT Account Cr
May-31 Purchases Day Book : VAT
242.20
Chapter 9: Purchases day book and purchase ledger including VAT
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9.2 Bakers Electrical Co
Purchases Day Book
Date Details Goods VAT Total
2010
Jul-03 Peak Electrical 722.00 126.35 848.35
Jul-08 Leigh Electrics 84.00 14.70 98.70
Jul-12 Thomas Motors 274.00 47.95 321.95
Jul-17 Naik & Sons 160.00 28.00 188.00
Jul-21 Peak Electrical 158.00 27.65 185.65
Jul-23 W D Services 46.00 8.05 54.05
Jul-25 Leighs Electrics 210.00 36.75 246.75
Jul-30 Naik & Sons 178.00 31.15 209.15
1832.00 320.60 2152.60
Purchases Ledger
Dr Peak Electrical Ltd Account Cr
Jul-03 Purchases 848.35
Jul-21 Purchases 185.65
Dr Leigh Electrics Account Cr
Jul-08 Purchases 98.70
Jul-25 Purchases 246.75
Dr Thomas Motors Account Cr
Jul-12 Purchases 321.95
Dr Naik & Sons Account Cr
Jul-17 Purchases 188.00
Jul-30 Purchases 209.15
Dr W D Services Account Cr
Jul-23 Purchases 54.05
General Ledger
Dr Purchases Account Cr
Jul-31 Credit purchases for the month
1832.00
Dr VAT Account Cr
Jul-31 Purchases Day Book : VAT
320.60
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9.3X Tasty Foods
Purchases Day Book
Date Details Goods VAT Total
2010
Aug 1 Barker Foods Ltd 62.00 10.85 72.85
Aug 6 Fern Bros 48.00 8.40 56.40
Aug 10 Ash Catering Co 224.00 39.20 263.20
Aug 14 Barker Foods Ltd 136.00 23.80 159.80
Aug 22 Farm Produce 98.00 17.15 115.15
Aug 27 Fern Bros 166.00 29.05 195.05
Aug 29 Leigh & Sons 84.00 14.70 98.70
Aug 30 Ash Catering Co 366.00 64.05 430.05
1,184.00 207.20 1,391.20
Purchases Ledger
Dr Barker Foods Ltd Account Cr
Aug 1 Purchases 72.85
Aug 14 Purchases 159.80
Dr Fern Bros Account Cr
Aug 6 Purchases 56.40
Aug 27 Purchases 195.05
Dr Ash Catering Co Account Cr
Aug 10 Purchases 263.20
Aug 30 Purchases 430.05
Dr Farm Products Account Cr
Aug 22 Purchases 115.15
Dr Leigh & Sons Account Cr
Aug 29 Purchases 98.70
General Ledger
Dr Purchases Account Cr
Aug 31 Credit purchases for the month
1,184.00
Dr VAT Account Cr
Aug 31 Purchases Day Book : VAT
207.20
9.4X It is important to check invoices prior to payment to ensure:The goods invoices match the order specificationThe goods have been receivedThey have been charged correctlyThe calculations are accurateThe invoice has been passed for payment
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Chapter 10: Sales returns day book and purchase returns day book
10.1
Sales Day Book (Page 7)
Date2010
DetailsGoods
VAT
Total
Jun-01 J Alcock 180.00 31.50 211.50
Jun-01 P Twigg 60.00 10.50 70.50
Jun-09 Bell Products 140.00 24.50 164.50
Jun-09 Travis Ltd 330.00 57.75 387.75
Jun-23 B Seddon 780.00 136.50 916.50
Jun-30 P Twigg 440.00 77.00 517.001930.00 337.75 2267.75
Sales Returns Day Book
Date Details Goods VAT Total
2010
Jun-12 J Alcock 12.00 2.10 14.10
Jun-28 Travis Ltd 50.00 8.75 58.7562.00 10.85 72.85
Sales Ledger
Dr J Alcock Account Cr
Jun-01 Sales 211.50 Jun-12 Sales returns 14.10
Dr P Twigg Account Cr
Jun-01 Sales 70.50517.00Jun-30 Sales
Dr Bell Products Account Cr
Jun-09 Sales 164.50
Dr Travis Ltd Account Cr
Jun-09 Sales 387.75 Jun-28 Sales returns 58.75
Dr B Seddon Account Cr
Jun-23 Sales 916.50
General Ledger
Dr Sales Account Cr
Jun-30 Total SDB 1930.00
Dr Sales Returns Account Cr
Jun-30 Total SRDB 62.00
Dr VAT Account Cr
Jun-30 Total SRDB 10.85 Jun-30 Total SDB 337.75
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10.2
Purchases Day Book
Date Details Goods VAT Total
2010
May-01 J Yau Ltd 120.00 21.00 141.00
May-05 S Wager 80.00 14.00 94.00
May-05 Ash Bros 220.00 38.50 258.50
May-14 J Yau Ltd 60.00 10.50 70.50
May-19 D Wong 300.00 52.50 352.50
May-19 Rughani & Co 280.00 49.00 329.00
May-19 Ash Bros 80.00 14.00 94.00
May-31 A Davies 56.00 9.80 65.80
May-31 Rughani & Co 172.00 30.10 202.101368.00 239.40 1607.40
Purchase Returns Day Book
Date Details Goods VAT Total
2010
May-09 J Yau Ltd 30.00 5.25 35.25
May-27 D Wong 42.00 7.35 49.3572.00 12.60 84.60
Purchase Ledger
Dr J Yau Ltd Account Cr
May-09 Purchase returns 35.25 May-01 Purchases 141.00
May-14 Purchases 70.50
Dr S Wager Account Cr
May-05 Purchases 94.00
Dr Ash Bros. Account Cr
May-05 Purchases 258.50
May-19 Purchases 94.00
Dr D Wong Account Cr
May-27 Purchase returns 49.35 May-19 Purchases 352.50
Dr Rughani & Co Account Cr
May-19 Purchases 329.00
May-31 Purchases 202.10
Dr A Davies Account Cr
May-31 Purchases 65.80
General Ledger
Dr Purchases Account Cr
May-31 Total PDB 1368.00
Dr Purchase Returns Account Cr
May-31 Total PRDB 72.00
Dr VAT Account Cr
May-31 Total PDB 239.40 May-31 Total PRDB 12.60
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10.3X Anderson's Ltd (b)
Purchases Day Book
Date Details Goods VAT Total2010Jan 2 Naylor's Ltd 1,300.00 227.50 1,527.50Jan 5 Roberts & Sons 668.00 116.90 784.90Jan 19 R. James & Co 1,512.00 264.60 1,776.60
3,480.00 609.00 4,089.00
Purchase Returns Day Book
Date Details Goods VAT Total2010Jan 13 Naylor's Ltd 84.00 14.70 98.70Jan 30 R. James & Co 400.00 70.00 470.00
484.00 84.70 568.70
Sales Day Book
Date Details Goods VAT Total2010Jan 12 Marlow (Fancy
Gifts)656.00 114.80 770.80
Jan 26 J. Jeynes 2,468.00 431.90 2,899.90Jan 26 Birch Bros 340.00 59.50 399.50Jan 28 F & J Shah 5,000.00 875.00 5,875.00Jan 28 Marlow (Fancy
Gifts)380.00 66.50 446.50
8,844.00 1,547.70 10,391.70
Sales Returns Day Book
Date Details Goods VAT Total2010
Jan 30Marlow (Fancy Gifts)
60.00 10.50 70.50
60.00 10.50 70.50
10.3X (a) (c) (e)
Sales Ledger
J. Jeynes Account
Jan-01 Balance b/d 1,490.00 Jan-31 Balance c/d 4,389.90
Jan-26 Sales 2,899.90
4,389.90 4,389.90
Feb-01 Balance b/d 4,389.90
Marlow (Fancy Goods) Account
Jan-01 Balance b/d 552.00 Jan-30 Sales Returns 70.50
Jan-12 Sales 770.80 Jan-31 Balance c/d 1,698.80
Jan-28 Sales 446.50
1,769.30 1,769.30
Feb-01 Balance b/d 1,698.80
F & J Shah Account
Jan-01 Balance b/d 780.00 Jan-31 Balance c/d 6,655.00
Jan-28 Sales 5,875.00
6,655.00 6,655.00
Feb-01 Balance b/d 6,655.00
Birch Bros Ltd Account
Jan-26 Sales 399.50
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10.3X (a) (c) (e)
Purchase Ledger
R. James & Co. Account
Jan-30 Purchase Returns 470.00 Jan-01 Balance b/d 1,600.00
Jan-31 Balance c/d 2,906.60 Jan-19 Purchases 1,776.60
3,376.60 3,376.60
Feb-01 Balance b/d 2,906.60
Naylor's Ltd Account
Jan-13 Purchase Returns 98.70 Jan-01 Balance b/d 900.00
Jan-31 Balance c/d 2,328.80 Jan-02 Purchases 1,527.50
2,427.50 2,427.50
Feb-01 Balance b/d 2,328.80
Roberts & Sons Account
Jan-31 Balance c/d 1,274.90 Jan-01 Balance b/d 490.00
Jan-05 Purchases 784.90
1,274.90 1,274.90
Feb-01 Balance b/d 1,274.90
10.3X (d)
General Ledger
Dr Sales Account Cr
Jan-31 Total Sales for January
8,844.00
Dr Sales Returns Account Cr
Jan-31 Total SRDB 60.00
Purchases Account
Jan-31 Total Purchases for January
3,480.00
Purchases Return Account
Jan-31 Total PRDB 484.00
Dr VAT Account Cr
Jan-31 Total PDB 609.00 Jan-31 Total PRDB 84.70Jan-31 Total SRDB 10.50 Jan-31 Total SDB 1,547.70Jan-31 Balance c/d 1,012.90
1,632.40 1,632.40
*Feb-01 Balance b/d 1,012.90
* The balance on the VAT account shows that Anderson's Ltd owe 1,012.90 to HMRC
10.4 Perris Design Company Reconciliation of ledger accounts with supplier's statements (a) Bennetts Ltd as at 31 July 2010 Balance per our Purchase Ledger 760.28 Add Purchases not received by us 121.50 Add Returns not received by supplier 63.50 Balance per Supplier's Statement 945.28
(b) Kirkhams Products Ltd as at 31 July 2010 Balance per our Purchase Ledger 1,387.68 Add Purchases not received by us 68.42 Add Returns not received by supplier 54.62 Balance per Supplier's Statement 1,510.72
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11.1
Cash Book
Cash Bank Cash Bank
(1) Capital 4,000 (2) Fixtures 660
(4) Sales 225 (4) Rent 140
(6) T Thomas 188 (12) Wages 275
(8) Sales 308 (15) Cash 200
(10) J King 300 (20) Stationery 60
(14)J Walters (Loan)
500 (22) J French 166
(15) Bank 200 (28) Drawings 100
(30) J Scott 277 (31) Balances c/d 216 4,247
(31) Sales 66
791 5,273 791 5,273
(1) Balances b/d 216 4,247
11.2X
Dr Cash Book Cr
2010 Cash Bank 2010 Cash Bank
Feb 1 Balance b/d 76.32 2,376.50 Feb 2 Electricity 156.00
Feb 6 D Hill 300.00 Feb 4 Motor expenses
15.00
Feb 6 A Jackson 275.00 Feb 7 Stationery 3.70
Feb 6 H Wardle 93.20 Feb 12 Palmer & Sons - purchases
723.50
Feb 10 Sales 57.10
Feb 14 D Whitman - loan
500.00 Feb 16 Wright Brothers
86.20
Feb 22 J Smith 217.00 Feb 17 Drawings 50.00
Feb 26 Sales 53.00 Feb 17 Post offi ce re:
Feb 28 Balance c/d 590.60 Telephone a/c 140.60
Mr S Jepson
Feb 23 Petrol 21.00
Feb 27 Brownsons of M/cr
899.00
Feb 28 Salaries 2,400.00
Feb 28 Balance c/d 43.72
133.42 4,405.30 133.42 4,405.30
Mar-01 Balances b/d 43.72 Mar-01 Balances b/d 590.60
Chapter 11: Cash books
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11.3
Cash Book
Disct Cash Bank Disct Cash Bank
(1) Capital 6,000 (1) Fixtures 950
(3) Sales 407 (2) Purchases 1,240
(5) N Morgan 10 210 (4) Rent 200
(9) S Cooper 20 380 (7) S Thompson 4 76
& Co
(14) L Curtis 115 (12) Rates 410
(20) P Exeter 2 78 (16) M Monroe 6 114
(31) Sales 88 (31) Calances c/d 93 4,195
32 407 6,871 10 407 6,871
General Ledger Discounts Allowed
(31) Cash Book 32
Discounts Received
(31) Cash Book 10
11.4X
DrM Pinero Cash Book
Cr
Disct Cash Bank Disct Cash Bank
(1) Balance b/d 58 (1) Balance b/d 1,470
(2) Capital 1,000 (3) Office fixtures
780
(4) Sales 220 (5) Bank 200
(5) Cash 200 (6) B Barnes 2 78
(8) Sales 500 (6) T Horton 6 234
(15) Bank 400 (6) T Jackin 10 390
(18) L Graham 4 76 (12) Motor Expenses
77
(18) B Crenshaw 7 133 (15) Cash 400
(18) H Green 11 209 (16) Drawings 120
(22) T Weiskopf 204 (20) Wages 210
(28) Cash 755 (26) Insurance 150
(30) Balance c/d 6,049 (28) Bank 755
(31) Motor Van 4,920
(31) Balance c/d 20
22 1,382 8,422 18 1,382 8,422
DrGeneral Ledger
Discounts Received AccountCr
(31) Cash Book 18
Dr Discounts Allowed Account Cr
(31) Cash Book 22
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12.1
Receipts
323334358363738
404142
39
Balance b/dCash Window cleanerPostage stampsPetrolStationeryJean Ford stampsOffice cleanerParcel postageMagazineComputer disksPetrolRefreshmentsOffice cleaner
Balance c/d
Balance b/d
Jun 012010
Jun 01Jun 01Jun 03Jun 04Jun 06Jun 10Jun 14Jun 16Jun 19Jun 21Jun 23Jun 27Jun 29
Jun 30
Jul 01
CashJul 01
18.52131.48
152.00
16.45
133.55
2.00
p
Date Details Total VAT Postage Cleaning MotorExpenses Expenses
Stationery SundryVoucher
Number
5.60
10.00
1.45
1.052.10
10.20
p
p
1.35
7.60
8.95
p
6.90
20.00
50.00
p
32.00
12.00
44.00
p
8.30
15.20
p
3.00
7.20
p
Amount required to restore imprest = Float required 150.00
Less Cash in hand 16.45
Amount required 133.55
10.007.60
37.609.75
20.00
3.00
14.10
20.00 20.00
16.45
135.55
152.00
1.35
7.95
4.20 4.20
Chapter 12: Petty cash and the imprest system
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Receipts
8081828384788586
8887
Balance Cash Envelopes and filesTea, Coffee and milkSpecial deliveryOffice cleanerCleaning materials M Lloyd StationeryPostage stampsTravel expensesFlowersPhotocopy paper
Balance
Balance
15 Oct2010
15 Oct16 Oct17 Oct18 Oct20 Oct20 Oct23 Oct23 Oct25 Oct27 Oct28 Oct
31 Oct
01 Nov
Cash01 Nov
23.4076.60
103.50
13.80
86.20
3.50
Date Details Total VAT Postage Cleaning TravelExpenses Expenses
Stationery SundryVoucher
1.66
0.63
0.741.40
4.43
7.00
8.60
3.60
15.60
8.00
20.00
23.60
16.42
16.42
10.00
18.00
7.40
11.65
Amount required to restore the imprest = Float required 100.00
Less Cash in hand 13.80
Amount required 86.20
11.667.408.60
20.004.23
16.42
9.40
13.80
89.70
103.50
7.00
4.99 4.25
b/d
c/d
b/d
Singh's Estate Agents - Petty Cash book12.2X
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Note: Both in theory and in practice you can start with the cash book balance working to the bank statement balance, or you can reverse this method. Many teachers and lecturers have their preferences, but this is a personal matter only. Examiners sometimes ask for them using one way, sometimes the other. Students should therefore be able to tackle them both ways.
13.1
(a)
Cash Book
2010 (Totals so far) 2,328 2010 (Totals so far) 497
Dec-31 J Walters 54 Dec-31 Bank charges 22
Dec-31 Balance c/d 1,863
2,382 2,382
(b)
Bank Reconciliation Statement as at 31 December 2010
Balance per cash book 1,863
Add Unpresented cheque 115
1,978
Less Bankings not yet on bank statement (249 1 178) 427
Balance per bank statement 1,551
OR
Bank Reconciliation Statement as at 31 December 2010
Balance per bank statement 1,551
Add Bankings not yer on bank statement (249 1 178) 427
1,978
Less Unpresented cheque 115
Balance per cash book 1,863
13.2X
(a)
DrPreston & Co
Cash BookCr
Dec 31 Balance b/d 9,155 Dec 31 Bank charges 110
Dec 31 BGC: P Todd 270 Dec 31 Balance c/d 9,315
9,425 9,425
Jan 1 Balance b/d 9,315
Chapter 13: Bank reconciliation statements
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(b)
Preston & Co Bank Reconciliation Statement as at 31 December 2010
Balance as per cash book 9,315
Add Unpresented cheque 575
9,890
Less Bankings not yet on bank statement ( 945 1 300 1 890) 2,135
Balance per bank statement 7,755
OR
Preston & Co Bank Reconciliation Statement as at 31 December 2010
Balance as per bank statement 7,755
Add Bankings not yet on bank statement ( 945 1 300 1 890) 2,135
9,890
Less Unpresented cheque 575
Balance per cash book 9,315
13.3
(a)
Cash Book - James Baxter
2010 2010
Mar-31 BGC - A May 929 Mar-31 Balance b/d 2,804
Mar-31 Balance c/d 2,003 Mar-31 Standing order - Oak plc
100
Mar-31 Bank charges 28
2,932 2,932
(b)
James Baxter Bank Reconciliation Statement as at 31 March 2010
Bank overdraft per cash book 2,003
Add Banking not entered on bank statement 160
2,163
Less Unpresented cheque 490
Bank overdraft per bank statement 1,673
OR
James Baxter Bank Reconciliation Statement as at 31 March 2010
Balance per bank statement 1,673 O/D
Less Banking not entered on bank statement 160
1,513 O/D
Add Unpresented cheque 490
Balance per cash book 2,003 O/D
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13.4X
(a)
E Flynn Cash Book
2010 2010
Dec-06 J Hallworth 155 Dec-01 Balance b/d 3,872
Dec-20 C Walters 189 Dec-10 P Wood 206
Dec-31 P Miller 211 Dec-19 M Roberts 315
Dec-31 K Saunders 180 Dec-29 P Phillips 84
Dec-31 Balance c/d 4,007 Dec-30 s/o Mercantile 200
Dec-31 Bank charges 65
4,742 4,742
(b)
E Flynn Bank Reconciliation Statement as at 31 December 2010
Bank overdraft per cash book 4,007
Add Bank lodgements not yet entered on bank statement 211
4,218
Less Unpresented cheque 84
Bank overdraft per bank statement 4,134
13.5
(a) A cheque that the bank refuses to pay due to insufficent funds in the debtor's account.
(b) Date Narrative Date Narrative Apr-01 Balance b/d 8,000 Apr-02 F Bashir (10123) 1,200
Apr-07 Sales banked 800 Apr-08 M Tyler (10124) 1,300
Apr-13 Sales banked 550 Apr-15 H Joshi (10125) 1,250
Apr-20 Sales banked 650 Apr-15 DD / MTC 250
Apr-30 Sales banked 750 Apr-20 DD / Pre. Ins 80
Apr-22 CT - M Bell 1,230 Apr-28 Bank charges 120
Apr-30 Dishonoured cheque 280
Apr-30 Balance c/d 7,500
11,980 11,980
May-01 Balance b/d 7,500
(c)
Real Kitchen Suppliers Bank Reconciliation Statement as at 30 April 2010
Balance as per cash book 7,500
Add: Unpresented cheque - 10125 1,250
8,750
Less: cash not yet credited 750
Balance per bank statement 8,000
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14.1
The Journal
Date Details Dr Cr
2010
Jan-01 Computer Equipment 4,000
Data Systems Ltd 4,000
Jan-05 Drawings 120
Purchases 120
Jan-08 Bad debts 220
J Oddy 220
Jan-15 Motor vehicle 15,500
Bank 15,500
Jan-29 Offi ce furniture and fi ttings 250
J Street 250
14.2X
(a) Fixtures Dr 1,809 J Harper Cr 1,809
(b) Drawings Dr 500 Purchases Cr 500
(c) Drawings Dr 100 Cash Cr 100
(d) Offi ce equipment
Dr 500 K Lamb Cr 500
(e) J Harper Dr 65 Fixtures Cr 65
(f) Bad debts Dr 68 J Brown Cr 68
(g) Offi ce equipment
Dr 2,190 Super Offi ces Cr 2,190
14.3
(a) J Harkness Dr 678 J Harker Cr 678
(b) Machinery Dr 4,390 L Pearson Cr 4,390
(c) Motor Van Dr 10,800 Motor expenses Cr 10,800
(d) E Fletcher Dr 9 Sales Cr 9
(e) Sales Dr 257 Commissions received
Cr 257
14.4X
(a) H Weld Dr 699 K Webb Cr 699
(b) Cash Dr 189 Bank Cr 189
(c) B Maxim Dr 443 B Gunn Cr 443
(d) K Innes Dr 10 Purchases Cr 10
(e) H Mersey* Dr 178 Cash Cr 178
*Needs double the amount to fi rst cancel out the error and then replace it with the correct amount.
Chapter 14: The journal
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14.5X
(a)
Journal
Dr Cr
Sep 30 Drawings 750
Purchases 750
Bring correction of error of omission
Sep 30 L Patel 500
A Patek 500
Being correction of your error of commission
(b)
Dr Suspense Account Cr
Sep 30 Balance b/d 340 Sep 30 Sales 240
Sep 30 Farmer & Co 170 Sep 30 Pointer Bros 270
510 510
(c) Before discovery of the errors in the Trial Balance the debit side was deficient by 340.
(d) The trial balance has its limitations since certain errors can occur and not be revealed, such as:-
Error of omission Error of commission Error of principle Error of original entry Compensating errors Complete reversal of entries
One from the above list.
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15.1
Dr Sales Ledger Control Account Cr
2010 2010
Oct-01 Balance b/d 12,340 Oct-31 SRDB 2,847
Oct-31 SDB 124,790 Oct-31 Bank & cash 116,225
Oct-31 Discount allowed 3,638
Oct-31 Balance c/d 14,420
137,130 137,130
Nov-01 Balance b/d 14,420
15.2X
Dr Sales Ledger Control Account Cr
2010 2010
Feb 1 Balance b/d 33,950 Feb 28 Bank & cash 332,920
Feb 28 SDB 347,480 Feb 28 Discount allowed 4,497
Feb 28 Bank : dishonouredcheques
791 Feb 28 SRDB 11,095
Feb 28 Bad Debts 977
Feb 28 Purchase ledger set offs
1,400
Feb 28 Balance c/d 31,332
382,221 382,221
Mar 1 Balance b/d 31,332
15.3
Dr Purchase Ledger Control Account Cr
2010 2010
Jul-31 PRDB 1,575 Jul-01 Balance b/d 19,450
Jul-31 Bank 26,150 Jul-31 PDB 28,200
Jul-31 Discount received 550
Jul-31 Balance c/d 19,375
47,650 47,650
Aug-01 Balance b/d 19,375
Chapter 15: Sales ledger and purchase ledger control accounts
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15.4X
Dr Purchase Ledger Control Account Cr
2010 2010
Jan 31 PRDB 2,835 Jan 31 Balance b/d 35,010
Jan 31 Bank 45,070 Jan 31 PDB 50,760
Jan 31 Discount received 990
Jan 31 Sales ledger set offs 2,000
Jan 31 Balance c/d 34,875
85,770 85,770
Feb 1 Balance b/d 34,875
15.5X
(a)
Dr Sales Ledger Control Account Cr
2009 2009
Jan 1 Balance b/d 65,000 Dec 31 RIDB 6,430
Dec 31 SDB 453,900 Dec 31 Bank 432,000
Dec 31 Returned cheque 750 Dec 31 Discount All 7,540
Dec 31 Bad Debts 650
Dec 31 Purchase ledger set offs
1,650
Dec 31 Balance c/d 71,380
519,650 519,650
(b) Ravi believes there may be errors in his sales ledger because the sales ledger shows 78.540 total debtors at the end of December 2009. Having constructed the control account the total debtors outstanding amounts to 71,380. Therefore there is a discrepancy of 78,540 71,380 7,160 which will require investigation.
(c) The closing balance of the sales ledger control account would appear under current assets in the balance sheet.
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16.1 Lucy ChanTrading and Profi t and Loss Account for the year ending 31 December 2010
Sales 133,770Less cost of goods sold
Purchases 84,665Less closing stock 15,085 69,580
Gross Profit 64,190Less Expenses
Rent 4,595Wages and salaries 28,865Printing and stationery 2,940Electricity expenses 2,485General expenses 1,295 40,180
Net Profit 24,010
16.2X Charles DrewTrading and Profi t and Loss Account for the year ending 31 December 2010
Sales 128,452Less cost of goods sold
Purchases 96,547Less closing stock 18,495 78,052
Gross Profit 50,400Less Expenses
Wages 11,229
Rent 5,330
Offi ce expenses 1,620
Motor expenses 922
Electricity expenses 1,350 20,451
Net Profit 29,949
Chapter 16: Trading account and profi t and loss account of a sole trader
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16.3 G SinghTrading and Profi t and Loss Account for the year ended 31 December 2010
Sales 73,848Less Cost of goods sold:
Purchases 58,516Less Closing stock 10,192 48,324
Gross Profit 25,524Less Expenses
Wages 8,600Motor expenses 2,080Rates 2,680Insurance 444General expenses 420 14,224
Net Profit 11,300
16.4X R CairnsTrading and Profi t and Loss Account for the year ended 30 June 2010
Sales 99,082Less Cost of goods sold
Purchases 71,409Less closing stock 11,498 59,911
Gross Profit 39,171Less Expenses
Wages 9,492Rates 2,000Printing and Stationery 562Electricity 1,266Insurance 605Sundry Expenses 1,518Motor expenses 3,109 18,552
Net Profit 20,619
16.5X
J LeungTrading and Profit and Loss Account for the year ended 31 March 2010
Sales 153,080Less Cost of goods sold
Purchases 133,171Less closing stock 42,828 90,343
Gross Profit 62,737Less Expenses
Rent and rates 6,708Insurance 1,312Electricity expenses 2,219Motor expenses 2,429Salaries and wages 26,855General expenses 3,466 42,989
Net Profit 19,748
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17.1 G SinghBalance Sheet as at 31 December 2010
Fixed AssetsBuildings 20,000 20,000
Motor vehicle 12,000 12,000
32,000 32,000
Current AssetsStock 10,192
Debtors 7,800
Cash at bank 6,616
Cash in hand 160 24,768
Less Current LiabilitiesCreditors 6,418 6,418
Net current assets 18,350
50,350Financed byCash introduced 48,000
Add Net profi t for the year 11,300
59,300
Less Drawings 8,950
50,350
17.2X R CairnsBalance Sheet as at 30 June 2010
Fixed assets
Premises 145,000 - 145,000
Computer equipment 8,000 - 8,000
Motor vehicle 16,500 - 16,500
169,500 - 169,500
Current assets
Stock 11,498
Debtors 9,498
Cash at bank 6,541
Cash in hand - 27,537
Less Current liabilities
Creditors 3,618 3,618
Net current assets 23,919
193,419
Financed by:
Capital introduced 185,000
Add Net profi t for the year 20,619
205,619
Less Drawings 12,200
193,419
Chapter 17: The Balance Sheet
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17.3 J LeungBalance Sheet as at 31 March 2010
Fixed Assets
Buildings 120,400 120,400
Equipment 17,028 17,028
Motor van 15,050 15,050
152,478 152,478
Current Assets
Stock 42,828
Debtors 29,283
Cash at bank 4,876 76,987
Less Current Liabilities
Creditors 13,975 13,975
Working Capital 63,012
215,490
Financed by Capital 212,736
Net profi t 19,748
232,484
Less Drawings 16,994
215,490
17.4X Sarah JoshiTrading and Pro t and Loss Account for the
year ended 31 May 2010
Sales 103,658
Less Cost of goods sold
Purchases 85,691
Less closing stock 14,998 70,693
Gross Profit 32,965
Less Expenses
Rent 3,000
General expenses 822
Motor expenses 3,473
Printing and stationery 605
Wages and salaries 12,465
Heating and lighting 1,319
Insurance 578 22,262
Net Profit 10,703
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Balance Sheet as at 31 May 2010
Fixed Assets
Buildings 180,000 - 180,000
Computer equipment 3,600 - 3,600
Motor vehicle 19,800 - 19,800
203,400 - 203,400
Current Assets
Stock 14,998
Debtors 11,398
Cash at bank 13,850 40,246
Less Current Liabilities
Creditors 4,343 4,343
Net current assets / working capital 35,903
Less Long-term liabilities -
239,303
Financed By:
Capital 237,240
Add Net profit 10,703
247,943
Less Drawings 8,640
239,303
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18.1 K JepsonTrading account for the year ended 31-Dec-10
Sales 69,736
Less cost of goods sold
Opening stock 12,463
Add purchases 47,536
Add carriage inwards 1,206
61,205
Less closing stock 13,480 47,725
Gross profit 22,011
18.2X Jane LiTrading and Profi t and Loss Account for the year ended 31 March 2010
Sales 98,280
Less Cost of Goods SoldOpening Stock 29,686
Add Purchases 66,429
Add Carriage Inwards 2,020
98,135
Less Closing Stock 33,307 64,828
Gross profit 33,452
Chapter 18: Financial statements: other considerations
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18.3 J MannTrading and Profit and Loss Account for the year ended 31 July 2010
Sales 110,859
Less sales returns 1,029
109,830
Less cost of goods sold
Opening stock 11,949
Add Purchases 65,100
Add carriage inwards 3,570
80,619
Less purchase returns 1,176
79,443
Less Closing stock 8,883 70,560
Gross Profit 39,270
Less Expenses
Salaries and wages 10,521
Rent 3,066
Motor Expenses 6,552
General expenses 882
Carriage outwards 1,659 22,680
Net Profit 16,590
18.4X Emily HartTrading and Profit and Loss Account for the year ended 31 December 2010
Sales 189,050
Less sales returns 2,850
186,200
Less Cost of Goods SoldOpening Stock 34,732
Add Purchases 122,683
Add Carriage Inwards 400
157,815
Less Purchase Returns 3,000
154,815
Less Closing Stock 32,984 121,831
Gross Profit 64,369
Less Expenses
Wages 21,875
Rent and rates 2,800
General expenses 684
Carriage outwards 931
Printing and stationery 525 26,815
Net Profit 37,554
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S ShahTrading and Profit and Loss Account for the year ended 30 June 2010
Sales 178,560
Less sales returns 1,968
176,592
Less cost of goods sold
Opening stock 22,733
Add Purchases 113,990
Add carriage inwards 2,976
139,699
Less purchase returns 3,091
136,608
Less Closing stock 28,320 108,288
Gross Profit 68,304
Less Expenses
Salaries and wages 37,075
Rent and rates 2,918
Insurance 749
Motor Expenses 4,250
Telephone and internet 4,198
Electricity 1,594
Carriage outwards 1,920
General expenses 3,014 55,718
Net Profit 12,586
Balance Sheet as at 30 June 2010
Fixed Assets
Buildings 80,000 80,000
Computer equipment 3,360 3,360
Motor vehicles 17,280 17,280
100,640 100,640
Current Assets
Stock 28,320
Debtors 37,402
Cash at bank 4,627 70,349
Less Current Liabilities
Creditors 32,618 32,618
Net Current Assets (Working Capital) 37,731
138,371
Less long-term liabilities
Long-term loans Nil
138,371
Financed by
Capital account
Balance b/f 137,305
Add net profit for the year 12,586
149,891
Less Drawings 11,520
138,371
18.5
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18.6X J CollinsTrading and Profit and Loss Account for the year ended 31 March 2010
Sales 74,400
Less Cost of sales
Opening stock 15,104
Add Purchases 46,224
Carriage inwards 936
62,264
Less Closing stock 19,992 42,272
Gross Profit 32,128
Less Expenses
Salaries and wages 11,788
Carriage outwards 1,304
Rent 1,824
Rates 1,080
Printing and stationery 810
Travel expenses 490
Telephone 756
Sundry expenses 2,808 20,860
Net Profit 11,268
Balance Sheet as at 31 March 2010
Fixed Assets
Fixtures and fittings 2,400 2,400
Computer equipment 9,600 9,600
12,000 12,000
Current Assets
Stock 19,992
Debtors 18,308
Cash at bank 15,504
Cash in hand 480 54,284
Less Current Liabilities
Creditors 12,180 12,180
Net Current assets 42,104
54,104
Financed by:
Capital 51,376
Add net profit 11,268
62,644
Less Drawings 8,540
54,104
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19.1
J Chen
(a) Straight Line (b) Reducing Balance
Cost 6,000 6,000
Year 1 Depreciation* 1,250 Year 1 Depreciation 40% 3 6,000
2,400
4,750 3,600
Year 2 Depreciation 1,250 Year 2 Depreciation 40% 3 3,600
1,440
3,500 2,160
Year 3 Depreciation 1,250 Year 3 Depreciation 40% 3 2,160
864
2,250 1,296
Year 4 Depreciation 1,250 Year 4 Depreciation 40% 3 1,296
519
1,000 777
*Depreciation 5 6,000 2 1, 000 _____________ 4 5 1,250
19.2
Machine
(a) Straight Line (b) Reducing Balance
Cost 75,000 75,000
Year 1 Depreciation* 11,070 Year 1 Depreciation 20% 3 75,000
15,000
63,930 60,000
Year 2 Depreciation 11,070 Year 2 Depreciation 20% 3 60,000
12,000
52,860 48,000
Year 3 Depreciation 11,070 Year 3 Depreciation 20% 3 48,000
9,600
41,790 38,400
Year 4 Depreciation 11,070 Year 4 Depreciation 20% 3 38,400
7,680
30,720 30,720
*Depreciation 5 75,000 2 30,720 _______________ 4 5 11,070
Chapter 19: The concept of depreciation of xed assets
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19.3X
(a)
Reducing Balance
Cost 19,200
Year 1 Depreciation 50% of 19,200 9,600
9,600
Year 2 Depreciation 50% of 9,600 4,800
4,800
Year 3 Depreciation 50% of 4,800 2,400
2,400
Year 4 Depreciation 50% of 2,400 1,200
1,200
(b)
Straight Line
Cost 19,200
Year 1 Depreciation 4,500
14,700
Year 2 Depreciation 4,500
10,200
Year 3 Depreciation 4,500
5,700
Year 4 Depreciation 4,500
1,200
19,200 2 1,200 5 18,000 4 4 5 4,500
19.4X
Computer Equipment
(a) Straight Line (b) Reducing Balance
Cost 4,600 Cost 4,600
Year 1 Depreciation * 1,000 Year 1 Depreciation 25% 3 4,600
1,150
3,600 3,450
Year 2 Depreciation 1,000 Year 2 Depreciation 25% 3 3,450
862
2,600 2,588
Year 3 Depreciation 1,000 Year 3 Depreciation 25% 3 2,588
647
1,600 1,941
Year 4 Depreciation 1,000 Year 4 Depreciation 25% 3 1,941
485
600 1,456
* Depreciation 5 4,600 2 600 5 1,000
___________________________________ 4
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19.5X
(a)
Reducing Balance
Cost 72,900
Year 1 Depreciation 33 1 __ 3 % of 72,900 24,300
48,600
Year 2 Depreciation 33 1 __ 3 % of 48,600 16,200
32,400
Year 3 Depreciation 33 1 __ 3 % of 32,400 10,800
21,600
Year 4 Depreciation 33 1 __ 3 % of 21,600 7,200
14,400
Year 5 Depreciation 33 1 __ 3 % of 14,400 4,800
9,600
(b)
Straight Line
Cost 72,900
Year 1 Depreciation 12,660
60,240
Year 2 Depreciation 12,660
47,580
Year 3 Depreciation 12,660
34,920
Year 4 Depreciation 12,660
22,260
Year 5 Depreciation 12,660
9,600
72,900 2 9,600 5 63,300 4 5 5 12,660
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19.6
Dumper
(a) Reducing Balance (b) Straight Line
Cost 18,000 18,000
Year 1 Depreciation 40% 3 18,000 7,200
Year 1 Depreciation 5,000
10,800 13,000
Year 2 Depreciation 40% 3 10,800 4,320
Year 2 Depreciation 5,000
6,480 8,000
Year 3 Depreciation 40% 3 6,480 2,592
Year 3 Depreciation 5,000
3,888 3,000
Depreciation 5 18,000 2 3,000 ______________ 3 5 5,000
19.7X
(a) Machinery has straight line depreciation; fixtures has reducing balance.
(b) Machinery: 4,800 2 1,600 2 1,600 5 1,600 Fixtures: 2,025 2 506 2 380 5 1,139
(c) Machinery: 8,000 2 2,000 2 1,500 2 1,125 2 844 5 2,531 (Depreciation rate is 25% p.a.)
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20.1
(a)
Dr Motor Car Account Cr
2001
Jan-01 Bank 12,500
(b)
Dr Provision for Depreciation - Motor Car Account Cr
2001 2001
Dec-31 Balance c/d 2,500 Dec-31 Profi t and loss a/c 2,500
2002 2002
Dec-31 Balance c/d 4,500 Jan-01 Balance b/d 2,500
Dec-31 Profi t and loss a/c 2,000
4,500 4,500
2003 2003
Dec-31 Balance c/d 6,100 Jan-01 Balance b/d 4,500
Dec-31 Profi t and loss a/c 1,600
6,100 6,100
2004
Jan-01 Balance b/d 6,100
(c)
Profi t and Loss Account (extracts) for the year ended 31 December
2001 Depreciation 2,500
2002 Depreciation 2,000
2003 Depreciation 1,600
(d)
Balance Sheet (extracts) as at 31 December
Cost Total Depreciation Net book value
2001
Motor Car 12,500 2,500 10,000
2002
Motor Car 12,500 4,500 8,000
2003
Motor Car 12,500 6,100 6,400
Chapter 20: Double entry for depreciation and disposal of a fi xed asset
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20.2X
(a) Straight Line Method
Dr Machinery Account Cr
2001
Nov 01 Bank 18,000
Dr Provision for Depreciation - Machinery Account Cr
2002 2002
Oct 31 Balance c/d 1,800 Oct 31 Profit and loss a/c 1,800
Nov 1 Balance b/d 1,800
2003 2003
Oct 31 Balance c/d 3,600 Oct 31 Profit and loss a/c 1,800
3,600 3,600
Nov 1 Balance b/d 3,600
2004 2004
Oct 31 Balance c/d 5,400 Oct 31 Profit and loss a/c 1,800
5,400 5,400
Nov 1 Balance b/d 5,400
(b) Reducing Balance Method
Dr Machinery Account Cr
2001
Nov 01 Bank 18,000
Dr Provision for Depreciation - Machinery Account Cr
2002 2002
Oct 31 Balance c/d 1,800 Oct 31 Profit and loss a/c 1,800
Nov 1 Balance b/d 1,800
2003 2003
Oct 31 Balance c/d 3,420 Oct 31 Profit and loss a/c 1,620
3,420 3,420
Nov 1 Balance b/d 3,420
2004 2004
Oct 31 Balance c/d 4,878 Oct 31 Profit and loss a/c 1,458
4,878 4,878
Nov 1 Balance b/d 4,878
(c) Straight Line Method
Profit and Loss Account (extracts) for the year ended 31 October
2002 Depreciation - Machinery 1,800
2003 Depreciation - Machinery 1,800
2004 Depreciation - Machinery 1,800
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Balance Sheet (extracts) as at 31 October
Cost Total Depreciation Net Book Value
2002
Machinery 18,000 1,800 16,200
2003
Machinery 18,000 3,600 14,400
2004
Machinery 18,000 5,400 12,600
(d) Reducing Balance Method
Profit and Loss Account (extracts) for the year ended 31 October
2002 Depreciation - Machinery 1,800
2003 Depreciation - Machinery 1,620
2004 Depreciation - Machinery 1,458
Balance Sheet (extracts) as at 31 October
Cost Total Depreciation Net Book Value
2002
Machinery 18,000 1,800 16,200
2003
Machinery 18,000 3,420 14,580
2004
Machinery 18,000 4,878 13,122
20.3
(a)
Computer Equipment Account
2001 2004
Jan-01 Balance b/d 9,500 Jan-01 Computer equipment disposals 9,500
(b)
Provision for Depreciation : Computer Equipment Account
2001 2001
Dec-31 Balance c/d 1,900 Jan-01Computer equipment
1,900
2002 2002
Dec-31 Balance c/d 3,800 Jan-01 Balance b/d 1,900
Dec-31 Profit and loss 1,900
3,800 3,800
2003 2003
Dec-31 Balance c/d 5,700 Jan-01 Balance b/d 3,800
Dec-31 Profit and loss 1,900
5,700 5,700
2004 2004
Jan-01 Computer equipment disposals
5,700 Jan-01 Balance b/d 5,700
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(c)
Computer Equipment Disposals Account
2004 2004
Jan-01 Computer 9,500 Jan-01 Depreciaiton 5,700
Dec-31 Profit and loss 450 Jan-01 Bank 4,250
9,950 9,950
(d)
Profit and Loss Account (extracts) for the year ended 31 December
2001 Depreciation - Computer Equipment 1,900
2002 Depreciation - Computer Equipment 1,900
2003 Depreciation - Computer Equipment 1,900
(e)
Balance Sheet (extracts) as at 31 December
Cost Total Depreciation Net book value
2001
Computer Equipment 9,500 1,900 7,600
2002
Computer Equipment 9,500 3,800 5,700
2003
Computer Equipment 9,500 5,700 3,800
20.4X
(a)
Motor Van Disposals Account
Motor Van 12,000 Provision for depreciation 9,700
Bank 1,850
Profit and loss : loss on sale 450
12,000 12,000
(b)
Machinery Disposals Account
Machinery 27,900 Provision for depreciation 19,400
Profit and loss : profit on sale 2,770 Bank 11,270
30,670 30,670
(c)
Fixtures Disposals Account
Fixtures 8,420 Provision for depreciation 7,135
Bank 50
Profit and loss : loss on sale 1,235
8,420 8,420
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(d)
Buildings Disposals Account
Buildings 200,000 Provision for depreciation 110,000
Profit and loss : profit on sale 59,000 Bank 149,000
259,000 259,000
20.5
(a) Straight Line Method
Cost 2 Scrap Value
_________________ No. of Years
35,000 2 11,000 ______________ 4
6,000 per annum
(b)
Dr Provision for Depreciation - Vehicles Account Cr
2005 2005
Mar-31 Balance c/d 7,000 Mar-31 Profit and loss 7,000
Apr-01 Balance b/d 7,000
2006 2006
Mar-31 Balance c/d 12,600 Mar-31 Profit and loss 5,600
12,600 12,600
Apr-01 Balance b/d 12,600
WORKINGS
Year ended 31/03/05 20% 3 35,000 7,000 per annum
Year ended 31/03/06 20% 3 (35,000 2 7,000) 5,600 per annum
(c) Any two from: Wear and tear, obsolence, time factors, inadequacy, depletion.
20.6X
(a)
RIALTO TRADERS Plant and Machinery Account
2007 2007
May 1 Balance b/d 500,000 Dec 31 Plant and machinery disposals
200,000
2008
Apr 30 Balance c/d 300,000
500,000 500,000
2008
May 1 Balance b/d 300,000
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(b)
Motor Vehicles Account
2007
May 1 Balance b/d 200,000
2008 2008
Feb 1 Bank 100,000 Apr 30 Balance c/d 300,000
300,000 300,000
May 1 Balance b/d 300,000
(c)
Provision for Depreciation - Plant and Machinery Account
2007 2007
Dec 31 Plant and Machinery- Disposals
150,000 May 1 Balance b/d 200,000
2008 2008
Apr 30 Balance c/d 80,000 Apr 30 Profit and Loss 30,000
230,000 230,000
May 1 Balance b/d 80,000
(d)
Plant and Machinery - Disposal Account
2007 2007
Dec 31 Plant and Machinery 200,000 Dec 31 Provision for Depreciation
150,000
Dec 31 Bank 40,000
Dec 31 Profit and Loss 10,000
200,000 200,000
(e) (i) Concept 1 Consistency Concept 2 Accruals
(ii) It is important to apply the consistency concept so that comparisons can be made between different years. Therefore in the above example depreciation is changed at 10% using the straight line method, the company needs to be consistent in using this method and the rate of depreciation in future final accounts. In applying the accruals concept the benefit that a fixed asset provides over its useful life is matched with the depreciation for the same period.
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21.1 Hart & Partners
(a) Dr Bad Debts Account Cr
2009 2009
May-16 S Bayley 550 Dec-31 Profi t & loss 1,240
Jul-31 J Carter 223
Nov-09 T Roche 467
1,240 1,240
Dr Provision For Doubtful Debts Account Cr
2009
Dec-31 Profi t & loss 520
(b) Profi t and Loss Account for the year ended 31 December 2009 (extracts)
Gross profi t
Less Expenses
Bad debts written off 1,240
Provision for doubtful debts 520 1,760
(c) Balance Sheet as at 31 December 2009 (extract)
Current Assets
Debtors 26,000
Less Provision for doubtful debts 520 25,480
21.2 Date
31-DecTotal debtors Profi t and
lossDr/Cr Final fi gure for
balance sheet
2007 7,000 70 Dr 6,930 (net)
2008 8,000 10 Dr 7,920 (net)
2009 6,000 20 Cr 5,940 (net)
2010 7,000 10 Dr 6,930 (net)
Chapter 21: Bad debts and provision for doubtful debts
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21.3X
Bad Debts
2007 2007
31 Dec Debtors 298 31 Dec Profit and loss a/c 298
2008 2008
31 Dec Debtors 386 31 Dec Profit and loss a/c 386
2009 2009
31 Dec Debtors 344 31 Dec Profit and loss a/c 344
2010 2010
31 Dec Debtors 477 31 Dec Profit and loss a/c 477
Provision for Doubtful Debts
2007 2007
31 Dec Balance c/d 100 31 Dec Profit and loss a/c 100
2008 2008
31 Dec Balance c/d 130 1 Jan Balance b/d 100
31 Dec Profit and loss a/c 30
130 130
2009 2009
31 Dec Profit and loss a/c 15 1 Jan Balance b/d 130
31 Dec Balance c/d 115
130 130
2010 2010
31 Dec Balance c/d 150 1 Jan Balance b/d 115
31 Dec Profit and loss a/c 35
150 150
2011
1 Jan Balance b/d 150
Profit and Loss Accountsfor the years ended 31 December (extracts)
2007
Bad debts 298
Provision for doubtful debts 100
2008
Bad debts 386
Provision for doubtful debts 30
2009 2009
Bad debts 344 Provision for doubtful debts 15
2010
Bad debts 477
Provision for doubtful debts 35
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Balance Sheet as at 31 Decemeber (extracts)
2007 Debtors 12,000
Less Provision for doubtful debts 100 11,900
2008 Debtors 15,000
Less Provision for doubtful debts 130 14,870
2009 Debtors 14,000
Less Provision for doubtful debts 115 13,885
2010 Debtors 18,000
Less Provision for doubtful debts 150 17,850
21.4X (a)
The Journal
Date Debit Credit
Apr 30 Bad Debts 500
A. Carter 500
Being bad debt written off
(b) Double entry for the creation of a Provision for Doubtful Debts Debit: Profit and Loss Account Credit: Provision for Doubtful Debts Account
(c) The prudence concept requires that the financial statements provide a true and fair view of the business at the date of the balance sheet. In addition profits should also reveal a correct and true figure. Therefore any anticipated losses need to be accounted for in the profit and loss account. Providing for a provision for doubtful debts anticipates any potential loss should a debtor fail to pay. By deducting the provision from the debtors in the balance sheet a more accurate figure of debtors is given.
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C HomerRent Account
2008 2008
Dec-31 Bank 1,600 Dec-31 Profi t and loss 2,000
Dec-31 Owing c/d 400
2,000 2,000
2009
Jan-01 Owing b/d 400
Insurance Account
2008 2008
Dec-31 Bank 900 Dec-31 Profi t and loss 635
Dec-31 Prepaid c/d 265
900 900
2009
Jan-01 Prepaid b/d 265
Motor Expenses Account
2008 2008
Dec-31 Bank 7,215 Dec-31 Profi t and loss 7,381
Dec-31 Owing c/d 166
7,381 7,381
2009
Jan-01 Owing b/d 166
Rates Account
2008 2008
Jan-01 Bank 750 Dec-31 Profi t and loss 1,500
Jul-01 Bank 1,125 Dec-31 Prepaid c/d 375
1,875 1,875
2009
Jan-01 Prepaid b/d 375
Rents Receivable Account
2008 2008
Dec-31 Profi t and loss 4,800 Apr-15 Bank 2,000
Dec-31 In advance c/d 1,600 Dec-15 Bank 4,400
6,400 6,400
2009
Jan-01 In advance b/d 1,600
Chapter 22: Accruals, prepayments and other adjustments for fi nancial statements
22.1
(a)
(b)
(c)
(d)
(e)
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T NortonGeneral Expenses Account
2009 2009
Dec-31 Bank 615 Dec-31 Profi t and loss 671
Dec-31 Owing c/d 56
671 671
2010
Jan-01 Owing b/d 56
Telephone Account
2009 2009
Dec-31 Bank 980 Dec-31 Profi t and loss 1,097
Dec-31 Owing c/d 117
1,097 1,097
2010
Jan-01 Owing b/d 117
Commission Received Account
2009 2009
Dec-31 Profi t and loss 3,231 Dec-31 Bank 3,056
Dec-31 Owing c/d 175
3,231 3,231
2010
Jan-01 Owing b/d 175
Carriage Outwards Account
2009 2009
Dec-31 Bank 666 Dec-31 Profi t and loss 788
Dec-31 Owing c/d 122
788 788
2010
Jan-01 Owing b/d 122
Insurance Account
2009 2009
Jan-01 Bank 1,080 Dec-31 Profi t and loss 1,440
Oct-01 Bank 1,080 Dec-31 Prepaid c/d 720
2,160 2,160
2010
Jan-01 Prepaid b/d 720
22.2
(a)
(b)
(c)
(d)
(e)
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T DaleStationery Account
2008 2009
01 Jul Stock b/d 290 30 Jun Profit and loss 800
2009 2009
30 Jun Cash and bank 855 30 Jun Stock c/d 345
1,145 1,145
General Expenses Account
2008
01 Jul Owing b/d 64
2009 2009
30 Jun Cash and bank 590 30 Jun Profit and loss 616
30 Jun Owing c/d 90
680 680
Rent and Rates Account
2008
01 Jul Owing b/d:
Rent 160
Rates 205
2009 2009
30 Jun Cash and bank 3,890 30 Jun Profit and loss 3,635
30 Jun Owing c/d 360 30 Jun Rent prepaid and c/d
250
4,250 4,250
Motor Expenses Account
2008
01 Jul Owing b/d 180
2009 2009
30 Jun Cash and bank 4,750 30 Jun Profit and loss 4,945
30 Jun Owing c/d 375
5,125 5,125
Commission Receivable Account
2008
01 Jul Owing b/d 80
2009 2009
30 Jun Profit and loss 915 30 Jun Cash and bank 850
30 Jun Owin c/d 145
995 995
22.3X
(a)
(b)
(c)
(d)
(e)
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C CainenTrading and Profit and Loss Account
for the year ended 31 December 2009
Sales 18,590
Less cost of goods sold
Opening stock 2,050
Add Purchases 11,170
13,220
Less Closing stock 3,910
9,310
Gross Profit 9,280
Less Expenses
Rent (640 2 160) 480
Wages and salaries (2,140 1 290) 2,430
Insurance (590 2 190) 400
Bad debts 270
Telephone (300 1 110) 410
General Expenses 180 4,170
Net Profit 5,110
K TylerTrading and Profit and Loss Account for the year ended 31 December 2010
Sales 54,190
Less Sales returns 200 53,990
Less cost of goods sold
Opening stock 8,620
Add Purchases 30,560
39,180
Less Closing stock 12,120 27,060
Gross Profit 26,930
Less Expenses
Wages and salaries (4,960 1 510) 5,470
Motor expenses 2,120
Rent and rates (1,200 2 160) 1,040
Discounts allowed 290
Lighting expenses (580 1 170) 750
Computer running expenses (1,210 2 140) 1,070
General expenses 360
Depreciation : Motor vehicles 700 11,800
Net Profit 15,130
22.4
22.5
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J SearsTrading and Profit and Loss Account
for the year ended 31 December 2010
Sales 80,000
Less Sales returns 1,000
79,000
Less Cost of goods sold:
Opening stock 20,000
Add Purchases 70,000
90,000
Less Purchase returns 1,240
88,760
Less Closing stock 24,000 64,760
Gross Profit 14,240
Less Expenses
Wages and salaries (7,200 1 450) 7,650
Telephone (200 2 20) 180
Bad debts 40
Provision for doubtful debts (1,960 3 10% 2 160) 36
Depreciation:
Store fittings 800
Motor van 1,200 9,906
Net Profit 4,334
J SearsBalance Sheet as at 31 December 2010
Cost Depreciation Net Book
Value
Fixed Assets
Store fittings 8,000 800 7,200
Motor van 6,000 1,200 4,800
14,000 2,000 12,000
Current Assets
Stock 24,000
Debtors 1,960
Less Provision for doubtful debts 196 1,764
Prepaid expenses 20
Bank 600
26,384
Less Current Liabilities
Creditors 1,400
Expenses owing 450 1,850
Net current assets 24,534
36,534
Financed by:
Capital
Balance 1.1.2010 35,800
Add Net profit 4,334
40,134
Less Drawings 3,600
36,534
22.6X
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Total Debtors
Balances b/d 2,760 Cash 14,610
Sales (difference) 14,940 Balances c/d 3,090
17,700 17,700
Total Creditors
Cash 9,390 Balances b/d 1,080
Balances c/d 1,320 Purchases (difference) 9,630
10,710 10,710
K RogersTrading Account for the year ended 31 October 2009
Sales 14,940Less Cost of Goods sold
Opening Stock 2,010Add Purchases 9,630
11,640Less Closing Stock 2,160 9,480
Gross Pro t 5,460
Total Debtors
2008 2009
1 Jun Balance b/d 5,670 31 May Bank 45,112
2009
31 May Sales 45,550 31 May Balance c/d 6,108
51,220 51,220
Total Creditors
2008
1 Jun Balances b/d 3,410
2009 2009
31 May Bank 29,375 31 May Purchases 30,091
31 May Balances c/d 4,126
33,501 33,501
Trading Account for the year ended 31 May 2009
Sales 45,550Less Cost Of Goods Sold
Opening Stock 11,590Add Purchases 30,091
41,681Less Closing Stock 13,425 28,256
Gross Profi t 17,294
Chapter 23: Incomplete records
23.1
(a)
(b)
23.2X
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D LewinskiBalance Sheet as at 30 June 2009
Fixed assets
Plant 36,000Fixtures 3,600
39,600Current assets
Stock 13,500Debtors 9,300Bank 6,000Cash 1,350
30,150Less Current Liabilities
Creditors 7,200Net current assets 22,950
62,550Financed by:
CapitalCash introduction 60,000Add Net profit 18,550
78,550Less Drawings 16,000
62,550
J Marcano
Statement of Affairs as at 31 August 2009
Fixed assets
Fixtures 3,500
Motor Van 3,500
7,000
Current assets
Stock 16,740
Debtors 11,890
Bank 2,209
Cash 115
30,954
Less Current liabilities
Creditors 9,952 21,002
28,002
23.3 (a) Capital is 62,550
(b)
23.4
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Statement of Affairs as at 31 August 2009
Fixed assets
Fixtures 5,500
Less Depreciation 300 5,200
Motor Van 3,500
Less Depreciation 700 2,800
8,000
Current assets
Stock 24,891
Debtors 15,821
Bank 72
Cash 84
40,868
Less Current liabilities
Trade creditors 6,002
Expenses owing 236
Bank overdraft 165 6,403
Net current assets 34,465
42,465
Capital
Balance as at 31/08/2009 28,002
Add Cash introduced 12,800
Add Net profit (C) 9,223
(B) 50,025
Less Drawings 7,560
(A) 42,465
(A) Found as the figure to make balance sheet totals agree 42,465.
(B) Less 7,560 5 (A) 42,465, therefore (B) is 50,025.
(C) Missing figure to total 50,025 5 9,223.
Dr Total Debtors Account Cr
2008
1 Apr Balances b/d 2,980
2009 2009
31 Mar Sales 11,520 31 Mar Cash 10,820
31 Mar Balances (difference) c/d
3,680
14,500 14,500
Dr Total Creditors Account Cr
2008
1 Apr Balance b/d 1,880
2009 2009
31 Mar Cash 7,780 31 Mar Purchases 8,120
31 Mar Balance (difference) c/d 2,220
10,000 10,000
23.5X
(a)
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A Hanson Calculation of Capital as at 31 March 2008 and 31 March 2009
31.3.2008 31.3.2009
Bank 1,460 1,740
Office furniture 600 500
Stock 2,320 2,620
Cash 60 80
Debtors 2,980 3,680
7,420 8,620
Less Creditors 1,880 2,220
Capital 5,540 6,400
Capital as at 31 March 2008 5,540
Add Net profit (B) 3,400(A) 8,940
Less Drawings 2,540
Capital as at 31 March 2009 6,400
Note: By arithmetical deduction, (A) is 8,940. Thus 5,540 1 (B) 5 8,940, i.e (B) is 3,400.
Total Debtors Account
Dec-01 Balances b/d 450 Nov 30 Bank 7,500
Sales 7,628 Nov 30 Balance c/d 578
8,078 8,078
Calculation of Sales
Credit Sales 7,628
Cash Sales 200,552
Drawings 12 3 1,500 18,000
226,180
(b)
(c)
23.6X
(a) (i)
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Rent Account
Dec 01 Balance b/d 350 Nov 30 Profit and loss 8,760
Nov 30 Bank 8,900 Nov 30 Balance c/d 490
9,250 9,250
Loan Interest Account
Nov 30 Bank 600 Nov 30 Profit and loss 700
Nov 30 Balance c/d 100
700 700
Dec 1 Balance b/d 100
The loan interest needs adjusting so that the amount incurred for the year is ultimately charged to the profit and loss account i.e 7% 3 10,000 5 700. According to the records only 600 has been paid, therefore the difference between the amount due and paid (700 2 600 5 100. 100 needs to be accrued. The whole of the interest i.e. 700 is charged to the profit and loss account. The interest owing 100 is shown as a current liability so giving a true balance sheet. Without the adjustment the profit would be inaccurate.
(ii)
(iii)
(b)
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24.1 (a) A receipts and payments account is a summary of the cash book that shows the sources and uses of money for a non-profit making organisation. An income and expenditure account is the same as a business's proft and loss account. However, any surplus is not classed as profit but is called 'surplus of income over expenditure' any loss incurred is stated as 'excess of expenditure over income'.
(b) Capital - is the total resources invested in a business by the owner(s) and is represented by assets - liabilities. Accumulated fund - this is in effect the same as the capital account in that it is the difference between an organisation's assets and liabilities.
(c) Profit is the difference between the selling price of goods and their cost less any expenses incurred in running the business. A surplus of income over expenditure is the equi