Edexcel IGCSE Accounting Answers
Content
Answers
Chapter 1: Introduction to accounting principles
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 profit is made they keep all the profits
• Able to offer personal service to customers
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)
(b)
(c)
(d)
1.8
Materiality
Business entity
Money measurement
Prudence
Employees would be interested in their employer’s financial results for the
following reasons:
• The ability to pay wages and salaries
• Secure employment with the opportunity to progress within the business
• Continued profitability
• Sound cash flow position
• Sales maintained and increasing
• Business viable for the forthcoming period
• Healthy customer base
Chapter 1: Introduction to accounting principles
(Any one from the above would be acceptable as an answer)
(Any three of the above would be acceptable as an answer)
1
Answers
Chapter 2: Double entry for cash transactions
2.1
(a)
(b)
(c)
(d)
(e)
(f)
Purchases
Office equipment
Bank loan
Cash in hand
Motor vehicle
Loan from financial company
2.2X Wrong:
Chapter 2: Double entry for cash transactions
2.3
Assets
Money owing to bank
Account to be Debited
asset
asset
liability
asset
asset
liability
Liabilities
Motor van
Stock of goods
Account to be Credited
(a) Cash
Capital
(b) Bank
Cash
(c) Purchases
Cash
(d) Office Machinery
Bank
(e) Stationery
Cash
2.4X Account to be debited
(a) Bank
(b) Purchases
(c) Motor car
(d) Cash
(e) Motor expenses
(f) Computer equipment
2.5
-
Account to be credited
Capital
Cash
Bank
Uncle Joe loan
Cash
Cash
Max Morgan
Bank Account
Jan-01
Jan-15
Capital
Sales
30,000
500
Jan-05
Jan-07
Jan-27
Jan-30
Purchases
S/H Van
Computer
Equipment
Purchases
2,770
4,800
2,100
1,090
Capital Account
Jan-01
Bank
30,000
Purchases Account
Jan-05
Jan-30
Bank
Bank
2,770
1,090
Jan-07
Bank
4,800
Van Account
Cash Account
Jan-09
Jan-29
2
Sales
Sales
680
325
Jan-10
Jan-22
Office Furniture
Motor Expenses
110
92
Sales Account
Jan-09
Jan-15
Jan-29
Cash
Bank
Cash
680
500
325
Office Furniture Account
Jan-10
Cash
110
Motor Expenses Account
Jan-22
Cash
Jan-27
Bank
92
Computer Equipment Account
2,100
2.6X
Jane Mellor
Cash Account
May 1
May 20
Capital
Sales
22,000
328
May 3
May 22
Bank
Stationery
20,000
72
Cash
22,000
Capital Account
May-01
Bank Account
Cash
Sales
20,000
560
May 7
May 10
Rent
Purchases
May 15
Display units
May 23
Purchases
May 31
S/H Van
500
1,700
400
400
3,000
Rent Account
May 7
Bank
May 10
May 23
Bank
Bank
500
Purchases Account
1,700
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
Chapter 2: Double entry for cash transactions
May 3
May 25
3,000
3
Answers
Chapter 3: Double entry for credit transactions
3.1
Account to be Debited
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
Office Furniture
Chapter 3: Double entry for credit transactions
3.2X Account to be debited
(a) Computer equipment
(b) Stationery
(c) Purchases
(d) Daswami & Co
(e) Purchases
(f) Sales returns
(g) Cash
(h) J. Leung
3.3
Account to be Credited
(a) Purchases
Account to be credited
J. Kershaw
Cash
J. Leung
Sales
Bank
Daswani & Co
Sales
Purchase Returns
Kendrick Products
Cash Account
Jan-01
Capital
20,000
Jan-05
Jan-24
Bank
Stationery
18,000
45
Cash
20,000
Capital Account
Jan-01
Purchases Account
Jan-02
Jan-07
Jan-09
T. Peters
J. Leigh
Bank
2,543
349
592
Jan-18
Purchase Returns
Jan-26
Bank
2,383
Jan-05
Cash
18,000
T. Peters Account
160
Jan-02
Purchases
2,543
Purchases
T. Peters
592
2,383
Purchases
349
P. Lamond
D. Gurkan
210
1,008
Bank Account
Jan-09
Jan-26
J. Leighs Account
Jan-07
Sales Account
Jan-16
Jan-26
P. Lamond Acccount
Jan-16
Sales
210
Jan-30
Sales Returns
60
Purchase Returns Account
Jan-18
4
T. Peters
160
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
Apr 14
Apr 28
Purchases
C. Chang
2,300
950
Apr 30
Ash Car Sales
5,400
3.4X Mark & Co
Bank Account
Apr 1
Capital
40,000
Capital Account
Apr 01
Bank
40,000
Purchases Account
E. Shah
C. Chang
Bank
Apr 20
E. Shah
845
950
2,300
920
E. Shah Account
Apr 16
Purchase returns
72
Apr 03
Purchases
845
Apr 20
Purchases
920
Purchases
950
C. Chang Account
Apr 28
Bank
950
Apr 05
Motor Van Account
Apr 09
Ash Car Sales
Apr 30
Bank
10,400
Ash Car Sales Account
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
Motor Expenses
40
Chapter 3: Double entry for credit transactions
Apr 3
Apr 5
Apr 14
Cash Account
Apr 23
Sales
Apr 29
Sales
369
Apr 26
Curtis & Co Account
420
Motor Expenses Account
Apr 26
Cash
40
5
Answers
Chapter 4: Balancing of accounts and
preparation of a Trial Balance
4.1
Capital
May-01
Bank
2,500
K Gibson
D Ellis
C Mendez
Balance c/d
76
370
87
2,367
2,900
Rent
Stationery
Rent
Balance c/d
120
60
120
200
500
Balance c/d
240
Bank
Chapter 4: Balancing of accounts and preparation of a Trial Balance
May-01
May-09
May-10
Capital
C Bailey
H Spencer
2,500
250
150
May-12
May-12
May-31
May-31
2,900
Jun-01
Balance b/d
2,367
Cash
May-06
Sales
500
Jun-01
Balance b/d
200
May-08
May-19
Cash
Cash
120
120
240
Jun-01
Balance b/d
240
May-08
May-15
May-19
May-31
500
Rent
May-31
240
Stationery
May-15
Cash
60
Purchases
May-02
May-02
May-02
May-18
May-18
D Ellis
C Mendez
K Gibson
D Ellis
C Mendez
540
87
76
145
234
1,082
Jun-01
Balance b/d
1,082
May-31
Balance c/d
1,496
May-31
Balance c/d
1,082
Sales
May-04
May-04
May-04
May-06
May-25
May-25
May-25
C Bailey
B Hughes
H Spencer
Cash
C Bailey
B Hughes
H Spencer
430
62
176
500
90
110
128
1,496
Jun-01
Balance b/d
1,496
1,496
6
1,082
H Spencer
May-04
May-25
Sales
Sales
176
128
304
Jun-01
Balance b/d
154
May-12
May-31
Bank
Balance c/d
370
315
685
May-10
May-31
Bank
Balance c/d
150
154
304
May-02
May-18
Purchases
Purchases
540
145
685
Jun-01
Balance b/d
315
May-02
May-18
Purchases
C Mendez
Jun-01
Balance b/d
87
234
234
234
D Ellis
May-31
May-31
Bank
Balance c/d
87
234
234
K Gibson
May-12
Bank
76
May-02
Purchases
76
C Bailey
May-04
May-25
Sales
Sales
430
90
520
Jun-01
Balance b/d
270
May-09
May-31
Bank
Balance c/d
250
270
520
Balance c/d
172
B Hughes
May-04
May-25
Jun-01
Sales
Sales
Balance b/d
62
110
172
May-31
172
172
Trial Balance as at 31 May 2010
Dr
Cr
£
Capital
Bank
Cash
Rent
Stationery
Purchases
Sales
H Spencer
D Ellis
C Mendez
C Bailey
B Hughes
£
2,500
2,367
200
240
60
1,082
1,496
154
315
234
270
172
4,545
Chapter 4: Balancing of accounts and preparation of a Trial Balance
C Mendez
4,545
7
4.2X (a)
Bank Account
August 1
August 14
August 20
Capital
Sales
Sales
August 28
Sales
22,000
980
1,300
August 1
August 7
August 7
Rent
Shop fittings
Purchases
1,800
3,230
5,000
2,000
August 9
Cash
1,000
August 30
Salaries
2,100
August 30
Balance c/d
26,280
Sept 1
Balance b/d
13,150
26,280
13,150
4.2X
Chapter 4: Balancing of accounts and preparation of a Trial Balance
Cash Account
August 9
Bank
1,000
Sept 1
Balance b/d
1,000
809
August 9
August 16
August 30
Stationery
Sundry expenses
Balance c/d
163
28
809
1,000
August 1
August 20
August 28
Bank
Bank
Bank
980
1,300
2,000
4,280
Sept 1
Balance b/d
4,280
Balance c/d
10,700
Sales Account
August 30
Balance c/d
4,280
4,280
Purchases Account
August 7
August 10
August 25
Bank
Book supplies
Delta Books
5,000
4,200
1,500
10,700
September 1
balance b/d
10,700
August 7
Bank
August 30
10,700
Shop Fittings Account
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
Purchases
1,500
Delta Books Account
August 25
8
4.2X (b)
Jenny Moore
Trial Balance as at 31 August 2010
Cr
£
13,150
809
Bank
Cash
Sales
Purchases
Shop Fittings
Capital
Rent
Stationery
Sundry expenses
Salaries
Book Supplies
Delta Books
10,700
3,230
1,800
163
28
2,100
31,980
£
4,280
22,000
4,200
1,500
31,980
4.3
Bank
(1)
(30)
(30)
Capital
L Clark
K Allen
(1)
Balance b/d
15,000
440
76
(9)
(11)
(27)
(27)
(27)
(28)
(30)
(30)
Rent
Rates
Bowman Furnishers
Howe Homes
W Hunt
Motor Vehicles
Bates Motors
Balance c/d
15,516
500
190
532
460
2,070
3,000
5,000
3,764
15,516
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
(3)
(20)
Purchases
Purchases
620
220
840
(1)
Balance b/d
780
Balance c/d
500
Sales returns
Bank
40
440
480
J Bond
(17)
(30)
Purchases returns
Balance c/d
60
780
840
Chapter 4: Balancing of accounts and preparation of a Trial Balance
Dr
Rent
(9)
Bank
500
(1)
Balance b/d
500
(12)
Sales
480
(30)
L Clark
480
(23)
(30)
9
R Gee
(12)
Sales
1,170
(1)
Balance b/d
1,170
(30)
Balance c/d
1,170
Purchses Returns
(30)
Balance c/d
88
88
(17)
(17)
Bowman Furnishers
J Bond
28
60
88
(1)
Balance b/d
88
Balance c/d
8,000
Motor Vehicles
(25)
(28)
Bates Motors
Bank
5,000
3,000
8,000
(30)
Balance b/d
8,000
(30)
8,000
Chapter 4: Balancing of accounts and preparation of a Trial Balance
Stationery
(29)
Cash
(30)
Balance b/d
56
(30)
Balance c/d
56
Balance c/d
3,930
56
Purchases
(3)
(3)
(3)
(3)
(20)
(20)
(20)
Bowman Furnishers
Howe Homes
W Hunt
J Bond
J Bond
W Hunt
Bowman
(1)
Balance b/d
(17)
(27)
Purchases returns
Bank
320
460
1,800
620
220
270
240
3,930
(30)
3,930
3,930
Bowman Furnishers
28
532
560
(3)
(20)
Purchases
Purchases
320
240
560
Purchases
Purchases
1,800
270
2,070
(7)
(12)
(12)
(12)
(26)
Cash
L Clark
K Allen
R Gee
Cash
(1)
Balance b/d
480
480
96
1,170
175
2,401
2,401
Balance c/d
190
W Hunt
(27)
Bank
2,070
(3)
(20)
2,070
Sales
(30)
Balance c/d
2,401
2,401
Rates
10
(11)
Bank
190
(1)
Balance b/d
190
(30)
K Allen
(12)
Sales
96
(23)
(30)
Sales returns
Bank
20
76
96
Balance c/d
400
Balance c/d
60
96
Wages
(14)
Cash
400
(1)
Balance b/d
400
(23)
(23)
K Allen
L Clark
(30)
Balance b/d
(30)
Bank
5,000
(7)
(26)
Sales
Sales
480
175
(1)
Balance b/d
(30)
Sales Returns
20
40
60
(30)
60
60
Bates Motors
Motor vehicles
5,000
Cash
(14)
(29)
(30)
Wages
Stationery
Balance c/d
655
199
Trial Balance as at 30 April 2010
Dr
£
3,764
3,930
Bank
Purchases
Capital
J Bond
Sales
Rent
Rates
R Gee
Wages
Purchases returns
Sales returns
Motor vehicles
Stationery
Cash
Cr
£
15,000
780
2,401
500
190
1,170
400
88
60
8,000
56
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
400
56
199
655
Chapter 4: Balancing of accounts and preparation of a Trial Balance
(25)
11
(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
Chapter 4: Balancing of accounts and preparation of a Trial Balance
£
12
Capital
Drawings
General expenses
Sales
Purchases
Debtors
Creditors
Bank
Cash
Plant and equipment
Heating and lighting
Rent
7,000
500
29,000
6,800
15,100
200
5,000
1,500
2,400
67,500
4.6
£
20,000
38,500
9,000
67,500
Trial Balance of S Higton as at 30 June 2010
Dr
Cr
£
Capital
Sales
Stationery
General expenses
Motor expenses
Cash at the bank
Stock 1 July 2009
Wages and salaries
Rent and rates
Office equipment
Purchases
Heating and lighting
Rent received
Debtors
Drawings
Creditors
Motor vehicle
Interest received
Insurance
1,200
2,745
4,476
1,950
7,668
9,492
10,500
6,000
81,753
2,208
10,353
4,200
7,500
3,444
153,489
£
19,956
119,439
2,139
10,230
1,725
153,489
Trial Balance of Ms Anita Hall as at 31 December 2010
Dr
Plant and machinery
Motor vehicles
Premises
Wages
Purchases
Sales
Rent received
Telephone, printing and stationery
Creditors
Debtors
Bank overdraft
Capital
Drawings
General Expenses
Lighting and heating
Motor expenses
Motor vehicle
£
21,450
26,000
80,000
42,840
119,856
(b) Error of commission
(c) Error of omission
(d) Error of original entry
(e) Complete reversal of entries
(f) Error of principle
£
179,744
3,360
3,600
27,200
30,440
2,216
131,250
10,680
3,584
2,960
2,360
343,770
4.8X (a) Error of principle
Cr
343,770
Chapter 4: Balancing of accounts and preparation of a Trial Balance
4.7X
13
Answers
Chapter 5: Value Added Tax
5.1
(a)
C Black
Curzon Road
Stockport
To: J Booth
89 Andrew Lane
Stockport
INVOICE No 947T
Date: 1 March 2011
Your Order No. 1697
£
20,000 coils sealing tape x £4.70 per 1,000
94.00
40,000 sheets A5 paper x £4.50 per 1,000
180.00
30,000 sheets A4 paper x £4.20 per 1,000
126.00
400.00
70.00
470.00
VAT at 17.5%
VAT Reg No. 542 4483 95
(b)
J Booth's Books
C Black
2011
01-Mar
Purchases
C Black's Books
J Booth
Chapter 5: Value Added Tax
2011
01-Mar
14
Sales
470
5.2X (a) & (b) & (c)
2010
Name of Customer
Jan 2
Jan 6
Jan 7
D Woolham & Co
C Crawford
S Brocklehurst
Jan 9
Jan 13
Jan 18
Jan 21
Jan 24
Jan 29
Jan 31
L Price & Partners
D Woolham & Co
L Price & Partners
C Crawford
C Crawford
S Brocklehurst
L Price & Partners
Net
VAT
Total
£
230.00
348.00
1,980.00
£
40.25
60.90
346.50
£
270.25
408.90
2,326.50
520.00
56.00
200.00
340.00
44.00
846.00
722.00
5,286.00
91.00
9.80
35.00
59.50
7.70
148.05
126.35
925.05
611.00
65.80
235.00
399.50
51.70
994.05
848.35
6,211.05
470
5.3
(a) Cost of 22 reams of paper at £3.75
Input VAT is 17.5%
Customer Charged
Amount before VAT is added,
100
£235 ______
117.5
Therefore, output VAT is
Amount of VAT due to HMRC, £35.00 £14.44
(b) Net Amount
£40.00
£ 2.00
£53.28
£ 3.20
VAT
£7.00
£0.35
£9.32
£0.56
£82.50
£14.44
£96.94
£235.00 including VAT
£200.00
17.5
£82.50 ____
100
£35.00
£20.56
Total
£47.00
£ 2.35
£62.60
£ 3.76
5.4
(a) Ivy & Co
VAT Account
Dr
2010
Apr-30
May-31
Jun-30
Jun-30
Purchases Day Book
Purchases Day Book
Purchases Day Book
Balances c/d
8,750
7,350
9,625
2,380
28,105
Cr
2010
Apr-30
May-31
Jun-30
Sales Day Book
Sales Day Book
Sales Day Book
Jul-01
Balance b/d
9,205
8,400
10,500
28,105
2,380
When Ivy & Co pays this amount to HMRC this will clear the amount in the VAT
account.
5.5X
VAT Account
Dr
2010
Oct 31
Nov 30
Dec 31
Dec 31
Purchases Day Book
Purchases Day Book
Purchases Day Book
Balances c/d
6,580
6,895
9,100
13,300
35,875
2010
Oct 31
Nov 30
Dec 31
Cr
Sales Day Book
Sales Day Book
Sales Day Book
13,125
10,850
11,900
35,875
Jan 01
Balance b/d
Chapter 5: Value Added Tax
(b) The outstanding balance of £2,380 is the amount of VAT due to HMRC for the
quarter ending 30th June 2010.
13,300
(b) All business records must be kept for 6 years.
15
Answers
Chapter 6: Business documentation
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
Chapter 6: Business documentation
£
16
May 1
May 2
May 8
May 17
May 23
May 28
Balance b/forward
Invoice No. 7821
Invoice No. 7955
Credit Note No. 304
Invoice No. 8204
Cheque
£
43.75
35.00
10.20
74.50
51.50
Balance
£
101.50
145.25
180.25
170.05
244.55
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.
Answers
Chapter 7: Capital and revenue expenditure
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 fixed assets
7.2
Used up in the short term
Capital
(a)
(b)
(c)
(d)
(e)
New stationery and brochures
New pickup truck
New lathe
Delivery costs
Electricity
(f) Wages
- lathe
- wiring
- electricity costs
- Re: Improvements
- Other
£
18,000
5,200
200
1,800
20,000
-
Revenue
£
411
2,100
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
Cairns Engineering Co
17
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)
Chapter 7: Capital and revenue expenditure
18
Revenue (b), (d), (e), (g)
Answers
8.1
(a)
(b)
(c)
(d)
(e)
(f)
Sales day book / sales ledger / personal account
Cash book / general ledger / nominal account
Purchases day book / purchases ledger / personal account
Cash book / general ledger / nominal account
Sales returns day book / sales ledger / personal account
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
Date
2010
Nov-02
Nov-03
Nov-09
Nov-11
Nov-13
Nov-18
Nov-23
Nov-30
Details
T Bates
D Cope
F Chan
T Bates
B Ho
D Cope
M Saka & Sons
F Chan
Sales Day Book
Folio
Goods
£
186.00
166.00
12.00
54.00
66.00
32.00
20.00
320.00
856.00
VAT
£
32.55
29.05
2.10
9.45
11.55
5.60
3.50
56.00
149.80
Total
£
218.55
195.05
14.10
63.45
77.55
37.60
23.50
376.00
1005.80
Chapter 8: Books of original entry and ledgers – Sales day book and sales ledger including VAT
Chapter 8: Books of original entry and ledgers – Sales day
book and sales ledger including VAT
19
Sales Ledger
Chapter 8: Books of original entry and ledgers – Sales day book and sales ledger including VAT
20
Cr
T Bates Account
Dr
Nov-02
Nov-11
Dr
Nov-03
Nov-18
Dr
Nov-09
Nov-30
Dr
Nov-13
Dr
Nov-23
Sales
Sales
218.55
63.45
D Cope Account
195.05
37.60
F Chan Account
14.10
376.00
B Mo Account
77.55
M Saka & Sons Account
23.50
Sales
Sales
Sales
Sales
Sales
Sales
Cr
Cr
Cr
Cr
General Ledger
Dr
Dr
8.4X
Date
2011
Jul 1
Jul 5
Jul 8
Jul 14
Jul 19
Jul 26
Jul 28
Jul 31
Details
Sales Account
Nov-30
Credit sales for the month
Cr
856.00
VAT Account
Nov-30
Sales day book: VAT
149.80
Cr
Sales Day Book
Folio
Goods
Hall Products
Ash & Co
K. Meakin
A. Ballearic
Hall Products
G. Huang
A. Ballearic
J. Stead
520.00
62.00
18.00
110.00
880.00
126.00
42.00
98.00
1,856.00
VAT
91.00
10.85
3.15
19.25
154.00
22.05
7.35
17.15
324.80
Total
611.00
72.85
21.15
129.25
1,034.00
148.05
49.35
115.15
2,180.80
Sales Ledger
Hall Products Account
Dr
Jul 1
Jul 19
Dr
Jul 5
Dr
Jul 8
Dr
Jul 14
Jul 28
Sales
Sales
Sales
Sales
Sales
Sales
611.00
1,034.00
Ash & Co Account
72.85
K. Meakin Account
21.15
A. Ballearic Account
129.25
49.35
Cr
Cr
Cr
Cr
Dr
Jul 26
Dr
Jul 31
Sales
Sales
G. Huang Account
148.05
J Stead Account
115.15
Cr
Cr
Sales Account
Jul 31 Credit sales for the month
Dr
VAT Account
Jul 31 Sales day book : VAT
8.5
Cr
1,856.00
Cr
324.80
It is important to check sales invoices prior to sending them out to customers for
the following reasons:
• To ensure the customer’s 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.
Chapter 8: Books of original entry and ledgers – Sales day book and sales ledger including VAT
General Ledger
Dr
21
Answers
Chapter 9: Purchases day book and
purchase ledger including VAT
9.1
White Bros
Chapter 9: Purchases day book and purchase ledger including VAT
Purchases Day Book
Date
2010
May-01
May-07
May-16
May-23
May-26
May-28
May-31
Details
Bould & Co
Harlow & Brown
J Adams Ltd
Bould & Co
J H Products
Harlow & Brown
P Yeung Ltd
VAT
£
18.20
8.40
40.95
29.75
56.00
10.85
78.05
Total
£
122.20
56.40
274.95
199.75
376.00
72.85
524.05
1384.00
242.20
1626.20
Purchase Ledger
Dr
Bould & Co Account
May-01
May-23
Dr
Cr
Purchases
Purchases
Harlow and Brown Account
May-07
May-28
Dr
May-16
Dr
Purchases
Purchases
56.40
72.85
Purchases
274.95
Cr
J H Products Account
May-26
Dr
Cr
Purchases
376.00
Purchases
524.05
P Yeung Account
May-31
122.20
199.75
Cr
J Adam Ltd Account
Cr
General Ledger
Dr
May-31
Purchases Account
Credit purchases
for the month
Dr
May-31
22
Goods
£
104.00
48.00
234.00
170.00
320.00
62.00
446.00
1384.00
VAT Account
Purchases Day
Book : VAT
Cr
242.20
Cr
9.2
Bakers Electrical Co
Purchases Day Book
Date
2010
Jul-03
Jul-08
Jul-12
Jul-17
Jul-21
Jul-23
Jul-25
Jul-30
Details
Peak Electrical
Leigh Electrics
Thomas Motors
Naik & Sons
Peak Electrical
W D Services
Leighs Electrics
Naik & Sons
Goods
£
722.00
84.00
274.00
160.00
158.00
46.00
210.00
178.00
VAT
£
126.35
14.70
47.95
28.00
27.65
8.05
36.75
31.15
Total
£
848.35
98.70
321.95
188.00
185.65
54.05
246.75
209.15
1832.00
320.60
2152.60
Dr
Peak Electrical Ltd Account
Jul-03
Jul-21
Dr
Cr
Purchases
Purchases
Leigh Electrics Account
Jul-08
Jul-25
Dr
Cr
Purchases
Purchases
98.70
246.75
Purchases
321.95
Thomas Motors Account
Jul-12
Dr
Cr
Naik & Sons Account
Jul-17
Jul-30
Dr
Cr
Purchases
Purchases
188.00
209.15
Purchases
54.05
W D Services Account
Jul-23
848.35
185.65
Cr
General Ledger
Dr
Jul-31
Purchases Account
Credit purchases
for the month
Dr
Jul-31
1832.00
VAT Account
Purchases Day
Book : VAT
Cr
320.60
Cr
Chapter 9: Purchases day book and purchase ledger including VAT
Purchases Ledger
23
9.3X Tasty Foods
Purchases Day Book
Date
2010
Aug 1
Aug 6
Aug 10
Aug 14
Aug 22
Aug 27
Aug 29
Aug 30
Details
Goods
£
62.00
48.00
224.00
136.00
98.00
166.00
84.00
366.00
1,184.00
Barker Foods Ltd
Fern Bros
Ash Catering Co
Barker Foods Ltd
Farm Produce
Fern Bros
Leigh & Sons
Ash Catering Co
VAT
£
10.85
8.40
39.20
23.80
17.15
29.05
14.70
64.05
207.20
Total
£
72.85
56.40
263.20
159.80
115.15
195.05
98.70
430.05
1,391.20
Chapter 9: Purchases day book and purchase ledger including VAT
Purchases Ledger
24
Dr
Barker Foods Ltd Account
Aug 1
Aug 14
Dr
Cr
Purchases
Purchases
72.85
159.80
Purchases
Purchases
56.40
195.05
Fern Bros Account
Aug 6
Aug 27
Dr
Cr
Ash Catering Co Account
Cr
Aug 10
Purchases
263.20
Aug 30
Purchases
430.05
Dr
Farm Products Account
Dr
Leigh & Sons Account
Aug 22
Aug 29
Cr
Purchases
115.15
Cr
Purchases
98.70
General Ledger
Dr
Aug 31
Purchases Account
Credit purchases
for the month
Dr
Aug 31
VAT Account
Purchases Day
Book : VAT
Cr
1,184.00
207.20
9.4X It is important to check invoices prior to payment to ensure:
• The goods invoices match the order specification
• The goods have been received
• They have been charged correctly
• The calculations are accurate
• The invoice has been passed for payment
Cr
Answers
Chapter 10: Sales returns day book and purchase
returns day book
10.1
Date
2010
Jun-01
Jun-01
Jun-09
Jun-09
Jun-23
Jun-30
Goods
£
180.00
60.00
140.00
330.00
780.00
440.00
1930.00
Details
J Alcock
P Twigg
Bell Products
Travis Ltd
B Seddon
P Twigg
(Page 7)
VAT
£
31.50
10.50
24.50
57.75
136.50
77.00
337.75
Total
£
211.50
70.50
164.50
387.75
916.50
517.00
2267.75
VAT
£
2.10
8.75
10.85
Total
£
14.10
58.75
72.85
Sales Returns Day Book
Date
2010
Jun-12
Jun-28
Details
Goods
£
12.00
50.00
62.00
J Alcock
Travis Ltd
Sales Ledger
Dr
Jun-01
J Alcock Account
Sales
Dr
Jun-01
Jun-30
Sales
70.50
517.00
Cr
164.50
387.75
Jun-28
Cr
Sales returns
B Seddon Account
Sales
14.10
Cr
Travis Ltd Account
Sales
Dr
Jun-23
Sales returns
Bell Products Account
Dr
Jun-09
Jun-12
P Twigg Account
Sales
Sales
Dr
Jun-09
211.50
Cr
58.75
Cr
916.50
Chapter 10: Sales returns day book and purchase returns day book
Sales Day Book
General Ledger
Dr
Sales Account
Jun-30
Dr
Jun-30
Sales Returns Account
Total SRDB
Dr
Jun-30
Cr
Total SDB
Cr
62.00
VAT Account
Total SRDB
1930.00
10.85
Jun-30
Cr
Total SDB
337.75
25
10.2
Purchases Day Book
Chapter 10: Sales returns day book and purchase returns day book
Date
2010
May-01
May-05
May-05
May-14
May-19
May-19
May-19
May-31
May-31
Details
Goods
£
120.00
80.00
220.00
60.00
300.00
280.00
80.00
56.00
172.00
1368.00
J Yau Ltd
S Wager
Ash Bros
J Yau Ltd
D Wong
Rughani & Co
Ash Bros
A Davies
Rughani & Co
VAT
£
21.00
14.00
38.50
10.50
52.50
49.00
14.00
9.80
30.10
239.40
Total
£
141.00
94.00
258.50
70.50
352.50
329.00
94.00
65.80
202.10
1607.40
VAT
£
5.25
7.35
12.60
Total
£
35.25
49.35
84.60
Purchase Returns Day Book
Date
2010
May-09
May-27
Details
Goods
£
30.00
42.00
72.00
J Yau Ltd
D Wong
Purchase Ledger
Dr
May-09
J Yau Ltd Account
Purchase returns
Dr
35.25
May-01
May-14
Purchases
Purchases
S Wager Account
May-05
Dr
Dr
Purchases
94.00
Purchases
Purchases
258.50
94.00
Cr
D Wong Account
Purchase returns
Dr
49.35
May-19
Cr
Purchases
352.50
Purchases
Purchases
329.00
202.10
Purchases
65.80
Rughani & Co Account
May-19
May-31
Dr
Cr
A Davies Account
May-31
141.00
70.50
Cr
Ash Bros. Account
May-05
May-19
May-27
Cr
Cr
General Ledger
Dr
May-31
Purchases Account
Total PDB
Dr
Purchase Returns Account
May-31
Dr
May-31
26
Cr
1368.00
Cr
Total PRDB
72.00
Total PRDB
12.60
VAT Account
Total PDB
239.40
May-31
Cr
10.3X Anderson's Ltd (b)
Purchases Day Book
Date
2010
Jan 2
Jan 5
Jan 19
Details
Naylor's Ltd
Roberts & Sons
R. James & Co
Goods
VAT
Total
1,300.00
668.00
1,512.00
3,480.00
227.50
116.90
264.60
609.00
1,527.50
784.90
1,776.60
4,089.00
Purchase Returns Day Book
Date
2010
Jan 13
Jan 30
Details
Goods
VAT
Total
Naylor's Ltd
R. James & Co
84.00
400.00
484.00
14.70
70.00
84.70
98.70
470.00
568.70
Date
2010
Jan 12
Jan 26
Jan 26
Jan 28
Jan 28
Details
Goods
VAT
Total
Marlow (Fancy
Gifts)
J. Jeynes
Birch Bros
F & J Shah
Marlow (Fancy
Gifts)
656.00
114.80
770.80
2,468.00
340.00
5,000.00
380.00
431.90
59.50
875.00
66.50
2,899.90
399.50
5,875.00
446.50
8,844.00
1,547.70
10,391.70
Goods
VAT
Total
60.00
10.50
70.50
60.00
10.50
70.50
Sales Returns Day Book
Date
2010
Details
Marlow (Fancy
Gifts)
Jan 30
10.3X (a) (c) (e)
Sales Ledger
J. Jeynes Account
Jan-01
Jan-26
Feb-01
Balance b/d
Sales
Balance b/d
1,490.00
2,899.90
4,389.90
Jan-31
Balance c/d
4,389.90
4,389.90
4,389.90
Marlow (Fancy Goods) Account
Jan-01
Jan-12
Jan-28
Balance b/d
Sales
Sales
552.00
770.80
446.50
1,769.30
Feb-01
Balance b/d
1,698.80
Jan-01
Jan-28
Balance b/d
Sales
780.00
5,875.00
6,655.00
Feb-01
Balance b/d
6,655.00
Jan-26
Sales
Jan-30
Jan-31
Sales Returns
Balance c/d
70.50
1,698.80
1,769.30
Chapter 10: Sales returns day book and purchase returns day book
Sales Day Book
F & J Shah Account
Jan-31
Balance c/d
6,655.00
6,655.00
Birch Bros Ltd Account
399.50
27
10.3X (a) (c) (e)
Purchase Ledger
R. James & Co. Account
Jan-30
Jan-31
Purchase Returns
Balance c/d
470.00
2,906.60
3,376.60
Jan-01
Jan-19
Balance b/d
Purchases
1,600.00
1,776.60
3,376.60
Feb-01
Balance b/d
2,906.60
Jan-01
Jan-02
Balance b/d
Purchases
900.00
1,527.50
2,427.50
Feb-01
Balance b/d
2,328.80
Jan-01
Jan-05
Balance b/d
Purchases
490.00
784.90
1,274.90
Feb-01
Balance b/d
1,274.90
Naylor's Ltd Account
Jan-13
Jan-31
Purchase Returns
Balance c/d
98.70
2,328.80
2,427.50
Roberts & Sons Account
Chapter 10: Sales returns day book and purchase returns day book
Jan-31
28
Balance c/d
1,274.90
1,274.90
10.3X (d)
General Ledger
Dr
Cr
Sales Account
Jan-31
Dr
Total Sales for
January
Cr
Sales Returns Account
Jan-31
Total SRDB
Jan-31
Total Purchases
for January
8,844.00
60.00
Purchases Account
3,480.00
Purchases Return Account
Jan-31
Dr
Jan-31
Jan-31
Jan-31
Total PRDB
484.00
Jan-31
Jan-31
Total PRDB
Total SDB
84.70
1,547.70
*Feb-01
Balance b/d
1,632.40
1,012.90
Cr
VAT Account
Total PDB
Total SRDB
Balance c/d
609.00
10.50
1,012.90
1,632.40
* 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
Add Purchases not received by us
Add Returns not received by supplier
Balance per Supplier's Statement
1,387.68
68.42
54.62
1,510.72
Answers
Chapter 11: Cash books
11.1
Cash Book
Cash
(1)
(4)
(6)
(8)
(10)
(14)
(15)
(30)
(31)
(1)
Capital
Sales
T Thomas
Sales
J King
J Walters
(Loan)
Bank
J Scott
Sales
Balances b/d
Bank
4,000
Cash
(2)
(4)
(12)
(15)
(20)
Fixtures
Rent
Wages
Cash
Stationery
500
(22)
J French
277
(28)
(31)
Drawings
Balances c/d
225
188
308
300
200
66
791
5,273
216
4,247
Bank
660
140
275
200
60
166
100
216
4,247
791
5,273
11.2X
Dr
Cash Book
Cash
Bank
76.32
2010
Cash
Bank
Feb 1
Balance b/d
2,376.50
Feb 2
Electricity
Feb 6
D Hill
300.00
Feb 4
Motor
expenses
15.00
156.00
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
Feb 14
500.00
Feb 16
217.00
53.00
Feb 17
Feb 17
Wright
Brothers
Drawings
Post office re:
86.20
Feb 22
Feb 26
D Whitman loan
J Smith
Sales
Feb 28
Balance c/d
590.60
57.10
50.00
Telephone a/c
140.60
Mr S Jepson
133.42
Mar-01
Balances b/d
43.72
Feb 23
Petrol
Feb 27
Brownsons of
M/cr
Feb 28
Salaries
Feb 28
Balance c/d
4,405.30
21.00
899.00
2,400.00
43.72
133.42
Mar-01
Balances b/d
Chapter 11: Cash books
2010
Cr
4,405.30
590.60
29
11.3
Cash Book
Disct
(1)
(3)
(5)
(9)
Capital
Sales
N Morgan
S Cooper
(14)
(20)
(31)
L Curtis
P Exeter
Sales
Cash
Bank
6,000
407
10
20
210
380
2
32
407
115
78
88
6,871
Disct
(1)
(2)
(4)
(7)
(12)
(16)
(31)
Fixtures
Purchases
Rent
S Thompson
& Co
Rates
M Monroe
Calances c/d
Cash
Bank
950
1,240
200
4
76
410
6
10
114
93
407
4,195
6,871
General Ledger
Discounts Allowed
(31)
Cash Book
32
Discounts Received
(31)
Cash Book
10
11.4X
M Pinero
Cash Book
Dr
Chapter 11: Cash books
Disct
(1)
(2)
Balance b/d
Capital
(4)
(5)
(8)
(15)
(18)
Sales
Cash
Sales
Bank
L Graham
(18)
(18)
(22)
(28)
(30)
B Crenshaw
H Green
T Weiskopf
Cash
Balance c/d
Cash
58
Bank
1,000
220
200
500
400
4
76
7
11
133
209
204
755
6,049
22
1,382
Disct
(1)
(3)
(5)
(6)
(6)
(6)
(12)
(15)
(16)
(20)
(26)
(28)
(31)
(31)
8,422
Dr
Cash Book
Discounts Allowed Account
Cash Book
22
Cash
Bank
1,470
780
200
2
6
10
78
234
390
77
400
120
210
150
755
4,920
18
(31)
30
Balance b/d
Office
fixtures
Bank
B Barnes
T Horton
T Jackin
Motor
Expenses
Cash
Drawings
Wages
Insurance
Bank
Motor Van
Balance c/d
General Ledger
Discounts Received Account
Dr
(31)
Cr
20
1,382
8,422
Cr
18
Cr
Answers
Chapter 12: Petty cash and the imprest system
12.1
£
Date
Details
2.00
Total
£
Jun 01
Jun 01
Jun 01
Jun 03
Jun 04
Jun 06
Jun 10
Jun 14
Jun 16
Jun 19
Jun 21
Jun 23
Jun 27
Jun 29
Balance b/d
Cash
Window cleaner
Postage stamps
Petrol
Stationery
Jean Ford stamps
Office cleaner
Parcel postage
Magazine
Computer disks
Petrol
Refreshments
Office cleaner
p
10.00
7.60
37.60
9.75
32
33
34
35
8
36
37
38
39
40
41
42
20.00
1.35
3.00
7.95
14.10
4.20
20.00
135.55
Jun 30
Balance c/d
Jul 01
Balance b/d
Jul 01
Cash
152.00
16.45
133.55
VAT
Postage
Cleaning
Number
p
2010
18.52
131.48
Voucher
16.45
152.00
Amount required to restore imprest = Float required
£
150.00
Less Cash in hand 16.45
Amount required 133.55
£
p
£
p
£
p
Motor
Expenses
£ p
Stationery
£
p
Sundry
Expenses
£ p
10.00
7.60
5.60
1.45
32.00
8.30
20.00
1.35
3.00
1.05
2.10
6.90
12.00
4.20
20.00
10.20
8.95
50.00
44.00
15.20
7.20
Chapter 12: Petty cash and the imprest system
Receipts
31
Singh's Estate Agents - Petty Cash book
12.2X
Receipts
Date
Voucher
Details
Total
VAT
Postage
Cleaning
£
£
£
£
11.66
7.40
8.60
20.00
4.23
1.66
£
23.40
76.60
3.50
2010
15 Oct
15 Oct
16 Oct
17 Oct
18 Oct
20 Oct
20 Oct
23 Oct
23 Oct
25 Oct
27 Oct
28 Oct
Balance
Cash
Envelopes and files
Tea, Coffee and milk
Special delivery
Office cleaner
Cleaning materials
M Lloyd Stationery
Postage stamps
Travel expenses
Flowers
Photocopy paper
80
81
82
83
84
78
85
86
87
88
Chapter 12: Petty cash and the imprest system
£
Sundry
Expenses
£
31 Oct Balance
c/d
01 Nov Balance
b/d
7.40
7.00
89.70
4.43
01 Nov Cash
Less Cash in hand
13.80
Amount required
86.20
20.00
3.60
0.63
0.74
1.40
13.80
103.50
10.00
8.60
7.00
16.42
4.99
9.40
Amount required to restore the imprest = Float required 100.00
32
Stationery
b/d
103.50
13.80
86.20
Travel
Expenses
£
16.42
4.25
8.00
15.60
23.60
16.42
18.00
11.65
Answers
Chapter 13: Bank reconciliation statements
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
Dec-31
(Totals so far)
J Walters
2,328
54
2010
Dec-31
Dec-31
(Totals so far)
Bank charges
Balance c/d
2,382
497
22
1,863
2,382
(b)
Less Bankings not yet on bank statement (249 1 178)
1,863
115
1,978
427
Balance per bank statement
1,551
OR
Bank Reconciliation Statement as at 31 December 2010
Balance per bank statement
Add Bankings not yer on bank statement (249 1 178)
Less Unpresented cheque
1,551
427
1,978
115
Balance per cash book
1,863
13.2X
(a)
Preston & Co
Cash Book
Dr
Dec 31
Dec 31
Balance b/d
BGC: P Todd
9,155
270
9,425
Jan 1
Balance b/d
Dec 31
Dec 31
Cr
Bank charges
Balance c/d
110
9,315
Chapter 13: Bank reconciliation statements
Bank Reconciliation Statement as at 31 December 2010
Balance per cash book
Add Unpresented cheque
9,425
9,315
33
(b)
Preston & Co
Bank Reconciliation Statement as at 31 December 2010
£
9,315
575
Balance as per cash book
Add Unpresented cheque
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
£
7,755
2,135
Balance as per bank statement
Add Bankings not yet on bank statement ( 945 1 300 1 890)
9,890
Less Unpresented cheque
575
Balance per cash book
9,315
13.3
(a)
Chapter 13: Bank reconciliation statements
Cash Book - James Baxter
2010
Mar-31
Mar-31
BGC - A May
Balance c/d
£
929
2,003
2010
Mar-31
Mar-31
Mar-31
£
2,804
100
Balance b/d
Standing order
- Oak plc
Bank charges
28
2,932
2,932
(b)
James Baxter
Bank Reconciliation Statement as at 31 March 2010
£
2,003
160
Bank overdraft per cash book
Add Banking not entered on bank statement
2,163
Less Unpresented cheque
490
Bank overdraft per bank statement
1,673
OR
James Baxter
Bank Reconciliation Statement as at 31 March 2010
34
Balance per bank statement
Less Banking not entered on bank statement
£
1,673
160
1,513
490
O/D
Add Unpresented cheque
Balance per cash book
2,003
O/D
O/D
13.4X
(a)
E Flynn
Cash Book
2010
Dec-06
Dec-20
Dec-31
Dec-31
Dec-31
J Hallworth
C Walters
P Miller
K Saunders
Balance c/d
155
189
211
180
4,007
2010
Dec-01
Dec-10
Dec-19
Dec-29
Dec-30
Dec-31
Balance b/d
P Wood
M Roberts
P Phillips
s/o Mercantile
Bank charges
3,872
206
315
84
200
65
4,742
4,742
(b)
E Flynn
Bank Reconciliation Statement as at 31 December 2010
Bank overdraft per cash book
Add Bank lodgements not yet entered on bank statement
4,007
211
4,218
Less Unpresented cheque
84
Bank overdraft per bank statement
4,134
(b) Date
Apr-01
Apr-07
Apr-13
Apr-20
Apr-30
Apr-22
Narrative
Balance b/d
Sales banked
Sales banked
Sales banked
Sales banked
CT - M Bell
£
8,000
800
550
650
750
1,230
Date
Apr-02
Apr-08
Apr-15
Apr-15
Apr-20
Apr-28
Apr-30
Apr-30
Narrative
F Bashir (10123)
M Tyler (10124)
H Joshi (10125)
DD / MTC
DD / Pre. Ins
Bank charges
Dishonoured cheque
Balance c/d
11,980
May-01
Balance b/d
Chapter 13: Bank reconciliation statements
13.5
(a) A cheque that the bank refuses to pay due to insufficent funds in the debtor's
account.
£
1,200
1,300
1,250
250
80
120
280
7,500
11,980
7,500
(c)
Real Kitchen Suppliers
Bank Reconciliation Statement as at 30 April 2010
Balance as per cash book
Add: Unpresented cheque - 10125
£
£
7,500
1,250
Less: cash not yet credited
8,750
750
Balance per bank statement
8,000
35
Answers
Chapter 14: The journal
14.1
The Journal
Date
2010
Jan-01
Jan-05
Jan-08
Jan-15
Jan-29
Details
Dr
£
4,000
Computer Equipment
Data Systems Ltd
Drawings
Purchases
Bad debts
J Oddy
Motor vehicle
Bank
Cr
£
4,000
120
120
220
220
15,500
15,500
Office furniture and fittings
250
J Street
250
14.2X
(a) Fixtures
(b) Drawings
Dr
Dr
1,809
500
(c) Drawings
Dr
(d) Office
equipment
Purchases
Cr
Cr
1,809
500
100
Cash
Cr
100
Dr
500
K Lamb
Cr
500
(e) J Harper
Dr
65
Fixtures
Cr
65
(f)
Dr
68
J Brown
Cr
68
Dr
2,190
Super Offices
Cr
2,190
(a) J Harkness
(b) Machinery
Dr
Dr
678
4,390
J Harker
L Pearson
Cr
Cr
678
4,390
(c) Motor Van
Dr
10,800
Motor expenses
Cr
10,800
Bad debts
Chapter 14: The journal
(g) Office
equipment
J Harper
14.3
(d) E Fletcher
Dr
9
(e) Sales
Dr
257
Dr
Dr
699
189
Sales
Cr
9
Commissions
received
Cr
257
K Webb
Bank
Cr
Cr
699
189
14.4X
(a) H Weld
(b) Cash
(c) B Maxim
Dr
443
(d) K Innes
Dr
10
(e) H Mersey*
Dr
178
B Gunn
Cr
443
Purchases
Cr
10
Cash
Cr
178
*Needs double the amount to first cancel out the error and then replace it with the
correct amount.
36
14.5X
(a)
Journal
Sep 30
Sep 30
Dr
750
Drawings
Purchases
Bring correction of error of omission
L Patel
A Patek
Cr
750
500
500
Being correction of your error of commission
(b)
Dr
Sep 30
Sep 30
Suspense Account
Balance b/d
Farmer & Co
340
170
510
Sep 30
Sep 30
Cr
Sales
Pointer Bros
240
270
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
Chapter 14: The journal
One from the above list.
37
Answers
Chapter 15: Sales ledger and purchase ledger
control accounts
15.1
Dr
Sales Ledger Control Account
2010
Oct-01
Oct-31
Balance b/d
SDB
Nov-01
Balance b/d
12,340
124,790
2010
Oct-31
Oct-31
Oct-31
Oct-31
SRDB
Bank & cash
Discount allowed
Balance c/d
Chapter 15: Sales ledger and purchase ledger control accounts
137,130
38
Cr
2,847
116,225
3,638
14,420
137,130
14,420
15.2X
Dr
2010
Feb 1
Feb 28
Feb 28
Sales Ledger Control Account
Balance b/d
SDB
Bank : dishonoured
cheques
33,950
347,480
791
2010
Feb 28
Feb 28
Feb 28
Feb 28
Feb 28
Feb 28
Bank & cash
Discount allowed
SRDB
Bad Debts
Purchase ledger
set offs
Balance c/d
382,221
Mar 1
Balance b/d
Cr
332,920
4,497
11,095
977
1,400
31,332
382,221
31,332
15.3
Dr
2010
Jul-31
Jul-31
Jul-31
Jul-31
Purchase Ledger Control Account
PRDB
Bank
Discount received
Balance c/d
1,575
26,150
550
19,375
47,650
2010
Jul-01
Jul-31
Balance b/d
PDB
Cr
19,450
28,200
47,650
Aug-01
Balance b/d
19,375
15.4X
Dr
2010
Jan 31
Jan 31
Jan 31
Jan 31
Jan 31
Purchase Ledger Control Account
PRDB
Bank
Discount received
Sales ledger set offs
Balance c/d
2,835
45,070
990
2,000
34,875
85,770
2010
Jan 31
Jan 31
Balance b/d
PDB
Cr
35,010
50,760
85,770
Feb 1
Balance b/d
34,875
15.5X
(a)
2009
Jan 1
Dec 31
Dec 31
Sales Ledger Control Account
Balance b/d
SDB
Returned cheque
65,000
453,900
750
2009
Dec 31
Dec 31
Dec 31
Dec 31
Dec 31
Dec 31
519,650
Cr
RIDB
Bank
Discount All
Bad Debts
Purchase ledger
set offs
Balance c/d
6,430
432,000
7,540
650
1,650
71,380
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.
Chapter 15: Sales ledger and purchase ledger control accounts
Dr
39
Answers
Chapter 16: Trading account and profit and
loss account of a sole trader
16.1
Lucy Chan
Trading and Profit and Loss Account for the year ending 31 December 2010
Chapter 16: Trading account and profit and loss account of a sole trader
£
40
Sales
Less cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent
Wages and salaries
Printing and stationery
Electricity expenses
General expenses
84,665
15,085
4,595
28,865
2,940
2,485
1,295
Net Profit
16.2X
£
133,770
69,580
64,190
40,180
24,010
Charles Drew
Trading and Profit and Loss Account for the year ending 31 December 2010
£
Sales
Less cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Wages
Rent
Office expenses
Motor expenses
Electricity expenses
Net Profit
96,547
18,495
11,229
5,330
1,620
922
1,350
£
128,452
78,052
50,400
20,451
29,949
G Singh
Trading and Profit and Loss Account for the year ended 31 December 2010
£
Sales
Less Cost of goods sold:
Purchases
Less Closing stock
Gross Profit
Less Expenses
Wages
Motor expenses
Rates
Insurance
General expenses
58,516
10,192
14,224
11,300
R Cairns
Trading and Profit and Loss Account for the year ended 30 June 2010
£
Sales
Less Cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Wages
Rates
Printing and Stationery
Electricity
Insurance
Sundry Expenses
Motor expenses
71,409
11,498
9,492
2,000
562
1,266
605
1,518
3,109
Net Profit
16.5X
48,324
25,524
8,600
2,080
2,680
444
420
Net Profit
16.4X
£
73,848
£
99,082
59,911
39,171
18,552
20,619
J Leung
Trading and Profit and Loss Account for the year ended 31 March 2010
£
Sales
Less Cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent and rates
Insurance
Electricity expenses
Motor expenses
Salaries and wages
General expenses
Net Profit
133,171
42,828
6,708
1,312
2,219
2,429
26,855
3,466
£
153,080
90,343
62,737
Chapter 16: Trading account and profit and loss account of a sole trader
16.3
42,989
19,748
41
Answers
Chapter 17: The Balance Sheet
17.1
G Singh
Balance Sheet as at 31 December 2010
£
Fixed Assets
Buildings
Motor vehicle
Current Assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current Liabilities
Creditors
£
£
20,000
12,000
20,000
12,000
32,000
32,000
10,192
7,800
6,616
160
24,768
6,418
6,418
Net current assets
18,350
50,350
Financed by
Cash introduced
48,000
11,300
Add Net profit for the year
59,300
8,950
Less Drawings
50,350
Chapter 17: The Balance Sheet
17.2X
R Cairns
Balance Sheet as at 30 June 2010
Fixed assets
Premises
Computer equipment
Motor vehicle
Current assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current liabilities
Creditors
Net current assets
Financed by:
Capital introduced
Add Net profit for the year
Less Drawings
£
£
£
145,000
8,000
-
145,000
8,000
16,500
-
16,500
169,500
-
169,500
11,498
9,498
6,541
-
27,537
3,618
3,618
23,919
193,419
185,000
20,619
205,619
12,200
193,419
42
17.3
J Leung
Balance Sheet as at 31 March 2010
£
Fixed Assets
Buildings
Equipment
Motor van
£
£
120,400
17,028
15,050
120,400
17,028
15,050
152,478
152,478
Current Assets
Stock
Debtors
Cash at bank
42,828
29,283
4,876
76,987
Less Current Liabilities
Creditors
13,975
13,975
Working Capital
63,012
215,490
Financed by
Capital
Net profit
212,736
19,748
232,484
16,994
Less Drawings
215,490
17.4X
Sarah Joshi
Trading and Profit and Loss Account for the
year ended 31 May 2010
Net Profit
85,691
14,998
3,000
822
3,473
605
12,465
1,319
578
£
103,658
70,693
32,965
22,262
10,703
Chapter 17: The Balance Sheet
£
Sales
Less Cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent
General expenses
Motor expenses
Printing and stationery
Wages and salaries
Heating and lighting
Insurance
43
Balance Sheet as at 31 May 2010
Fixed Assets
Buildings
Computer equipment
Motor vehicle
Current Assets
Stock
Debtors
Cash at bank
Less Current Liabilities
Creditors
Net current assets / working capital
Less Long-term liabilities
Financed By:
Capital
Add Net profit
Less Drawings
£
£
£
180,000
3,600
-
180,000
3,600
19,800
-
19,800
203,400
-
203,400
14,998
11,398
13,850
40,246
4,343
4,343
35,903
239,303
237,240
10,703
247,943
8,640
Chapter 17: The Balance Sheet
239,303
44
Answers
Chapter 18: Financial statements:
other considerations
18.1
K Jepson
Trading account for the year ended 31-Dec-10
£
Sales
Less cost of goods sold
Opening stock
Add purchases
Add carriage inwards
12,463
47,536
1,206
Less closing stock
61,205
13,480
Gross profit
47,725
22,011
Jane Li
Trading and Profit and Loss Account for the year ended 31 March 2010
£
Sales
Less Cost of Goods Sold
Opening Stock
Add Purchases
Add Carriage Inwards
29,686
66,429
2,020
Less Closing Stock
98,135
33,307
Gross profit
£
98,280
64,828
33,452
Chapter 18: Financial statements: other considerations
18.2X
£
69,736
45
18.3
J Mann
Trading and Profit and Loss Account for the year ended 31 July 2010
£
Sales
Less sales returns
Less cost of goods sold
Opening stock
Add Purchases
Add carriage inwards
Less purchase returns
Less Closing stock
Chapter 18: Financial statements: other considerations
Gross Profit
Less Expenses
Salaries and wages
Rent
Motor Expenses
General expenses
Carriage outwards
18.4X
70,560
39,270
10,521
3,066
6,552
882
1,659
Net Profit
22,680
16,590
Emily Hart
Trading and Profit and Loss Account for the year ended 31 December 2010
£
Sales
Less sales returns
Less Cost of Goods Sold
Opening Stock
Add Purchases
Add Carriage Inwards
Less Purchase Returns
Less Closing Stock
Gross Profit
Less Expenses
Wages
Rent and rates
General expenses
Carriage outwards
Printing and stationery
Net Profit
46
11,949
65,100
3,570
80,619
1,176
79,443
8,883
£
110,859
1,029
109,830
34,732
122,683
400
157,815
3,000
154,815
32,984
£
189,050
2,850
186,200
121,831
64,369
21,875
2,800
684
931
525
26,815
37,554
S Shah
Trading and Profit and Loss Account for the year ended 30 June 2010
£
£
178,560
1,968
176,592
Sales
Less sales returns
Less cost of goods sold
Opening stock
Add Purchases
Add carriage inwards
22,733
113,990
2,976
139,699
3,091
136,608
28,320
Less purchase returns
Less Closing stock
Gross Profit
Less Expenses
Salaries and wages
Rent and rates
Insurance
Motor Expenses
Telephone and internet
Electricity
Carriage outwards
General expenses
108,288
68,304
37,075
2,918
749
4,250
4,198
1,594
1,920
3,014
55,718
Net Profit
12,586
Balance Sheet as at 30 June 2010
£
Fixed Assets
Buildings
Computer equipment
Motor vehicles
Current Assets
Stock
Debtors
Cash at bank
Less Current Liabilities
Creditors
Net Current Assets (Working Capital)
Less long-term liabilities
Long-term loans
Financed by
Capital account
Balance b/f
Add net profit for the year
Less Drawings
£
80,000
3,360
17,280
100,640
£
80,000
3,360
17,280
100,640
28,320
37,402
4,627
70,349
32,618
32,618
37,731
138,371
Chapter 18: Financial statements: other considerations
18.5
Nil
138,371
137,305
12,586
149,891
11,520
138,371
47
18.6X
J Collins
Trading and Profit and Loss Account for the year ended 31 March 2010
£
Sales
Less Cost of sales
Opening stock
Add Purchases
Carriage inwards
£
15,104
46,224
936
62,264
19,992
Less Closing stock
Gross Profit
Less Expenses
Salaries and wages
Carriage outwards
Rent
Rates
Printing and stationery
Travel expenses
Telephone
Sundry expenses
11,788
1,304
1,824
1,080
810
490
756
2,808
Chapter 18: Financial statements: other considerations
Net Profit
48
£
74,400
42,272
32,128
20,860
11,268
Balance Sheet as at 31 March 2010
£
Fixed Assets
Fixtures and fittings
Computer equipment
Current Assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current Liabilities
Creditors
Net Current assets
Financed by:
Capital
Add net profit
Less Drawings
£
2,400
9,600
12,000
£
2,400
9,600
12,000
19,992
18,308
15,504
480
54,284
12,180
12,180
42,104
54,104
51,376
11,268
62,644
8,540
54,104
Answers
Chapter 19: The concept of depreciation
of fixed assets
19.1
J Chen
(b) Reducing Balance
Cost
Year 1
Depreciation*
£
£
6,000
6,000
1,250
Year 1
Depreciation 40% 3
£6,000
3,600
4,750
Year 2
Depreciation
1,250
Year 2
Depreciation 40% 3
£3,600
3,500
Year 3
Depreciation
1,250
Depreciation
1,250
1,440
2,160
Year 3
Depreciation 40% 3
£2,160
2,250
Year 4
2,400
864
1,296
Year 4
Depreciation 40% 3
£1,296
1,000
519
777
6,000 2 1, 000
*Depreciation 5 _____________
5 £1,250
4
19.2
Machine
(a) Straight Line
(b) Reducing Balance
Cost
Year 1
Depreciation*
£
£
75,000
75,000
11,070
Year 1
Depreciation 20% 3
£75,000
63,930
Year 2
Depreciation
11,070
60,000
Year 2
Depreciation 20% 3
£60,000
52,860
Year 3
Depreciation
11,070
Depreciation
11,070
30,720
12,000
48,000
Year 3
Depreciation 20% 3
£48,000
41,790
Year 4
15,000
9,600
Chapter 19: The concept of depreciation of fixed assets
(a) Straight Line
38,400
Year 4
Depreciation 20% 3
£38,400
7,680
30,720
75,000 2 30,720
*Depreciation 5 _______________
5 £11,070
4
49
19.3X
(a)
Reducing Balance
Cost
Year 1
Year 2
Year 3
Year 4
£
19,200
9,600
9,600
4,800
4,800
2,400
2,400
1,200
1,200
Depreciation 50% of 19,200
Depreciation 50% of 9,600
Depreciation 50% of 4,800
Depreciation 50% of 2,400
(b)
Chapter 19: The concept of depreciation of fixed assets
Straight Line
Cost
Year 1
Year 2
Year 3
Year 4
£
19,200
4,500
14,700
4,500
10,200
4,500
5,700
4,500
1,200
Depreciation
Depreciation
Depreciation
Depreciation
19,200 2 1,200 5 18,000 4 4 5 4,500
19.4X
Computer Equipment
(a) Straight Line
Cost
Year 1
Depreciation
Year 2
Depreciation
3,600
1,000
Year 2
Year 3
Depreciation
2,600
1,000
Year 3
Year 4
Depreciation
1,600
1,000
Year 4
Depreciation 4,600 2 600 £1,000
*___________________________________
4
50
(b) Reducing Balance
£
4,600
* 1,000
600
Cost
Year 1
Depreciation 25% 3
4,600
Depreciation 25% 3
3,450
Depreciation 25% 3
2,588
Depreciation 25% 3
1,941
£
4,600
1,150
3,450
862
2,588
647
1,941
485
1,456
19.5X
(a)
Reducing Balance
£
Cost
Year 1
72,900
Depreciation 33 __13 % of 72,900
24,300
Year 2
48,600
Depreciation 33 __13 % of 48,600
16,200
Year 3
32,400
Depreciation 33 __13 % of 32,400
10,800
Year 4
21,600
Depreciation 33 __13 % of 21,600
7,200
Year 5
14,400
Depreciation 33 __13 % of 14,400
4,800
9,600
(b)
£
Cost
Year 1
72,900
Depreciation
Year 2
60,240
Depreciation
Year 3
12,660
12,660
47,580
Depreciation
12,660
34,920
Year 4
Depreciation
Year 5
Depreciation
12,660
22,260
12,660
9,600
72,900 2 9,600 5 63,300 4 5 5 12,660
Chapter 19: The concept of depreciation of fixed assets
Straight Line
51
19.6
Dumper
(a) Reducing Balance
(b) Straight Line
£
Cost
Year 1
18,000
Depreciation 40% 3
£18,000
Year 2
Year 3
Year 1
Depreciation
Year 2
13,000
Depreciation
Year 3
Depreciation
5,000
2,592
3,888
18,000 2 3,000
19.7X
(a) Machinery has straight line depreciation; fixtures has reducing balance.
Chapter 19: The concept of depreciation of fixed assets
5,000
8,000
Depreciation ______________
£5,000
3
52
5,000
4,320
6,480
Depreciation 40% 3
£6,480
18,000
7,200
10,800
Depreciation 40% 3
£10,800
£
(b) Machinery: 4,800 2 1,600 2 1,600 1,600
Fixtures: 2,025 2 506 2 380 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.)
3,000
Answers
Chapter 20: Double entry for depreciation and
disposal of a fixed asset
20.1
(a)
Motor Car Account
Dr
2001
Jan-01
Cr
£
12,500
Bank
£
Dr
2001
Dec-31
2002
Dec-31
Provision for Depreciation - Motor Car Account
Cr
Balance c/d
£
2,500
2001
Dec-31
Profit and loss a/c
Balance c/d
4,500
2002
Jan-01
Dec-31
Balance b/d
Profit and loss a/c
2,500
2,000
4,500
2003
Jan-01
Dec-31
Balance b/d
Profit and loss a/c
4,500
1,600
6,100
2004
Jan-01
Balance b/d
6,100
4,500
2003
Dec-31
Balance c/d
6,100
6,100
£
2,500
(c)
Profit 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
2001
Motor Car
Cost
£
12,500
Total Depreciation
£
2,500
Net book value
£
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 fixed asset
(b)
53
20.2X
(a)
Straight Line Method
Dr
Machinery Account
2001
Nov 01
Bank
Dr
Chapter 20: Double entry for depreciation and disposal of a fixed asset
Balance c/d
2004
Oct 31
2004
Oct 31
(c)
5,400
5,400
2002
Oct 31
Cr
Profit and loss a/c
£
1,800
Nov 1
2003
Oct 31
Balance b/d
1,800
Profit and loss a/c
1,800
3,600
Nov 1
Balance b/d
3,600
2004
Oct 31
Profit and loss a/c
1,800
5,400
Nov 1
Balance b/d
5,400
Reducing Balance Method
Machinery Account
2001
Nov 01
2003
Oct 31
3,600
3,600
Balance c/d
Dr
2002
Oct 31
£
1,800
Balance c/d
2003
Oct 31
Dr
£
Provision for Depreciation - Machinery Account
2002
Oct 31
(b)
Cr
£
18,000
Cr
£
18,000
Bank
£
Provision for Depreciation - Machinery Account
Balance c/d
Balance c/d
Balance c/d
£
1,800
3,420
3,420
4,878
4,878
2002
Oct 31
Cr
Profit and loss a/c
£
1,800
Nov 1
2003
Oct 31
Balance b/d
1,800
Profit and loss a/c
1,620
3,420
Nov 1
Balance b/d
3,420
2004
Oct 31
Profit and loss a/c
1,458
4,878
Nov 1
Balance b/d
4,878
Straight Line Method
Profit and Loss Account (extracts) for the year ended 31 October
54
2002
Depreciation - Machinery
£
1,800
2003
Depreciation - Machinery
1,800
2004
Depreciation - Machinery
1,800
Balance Sheet (extracts) as at 31 October
2002
Machinery
Cost
£
18,000
Total Depreciation
£
1,800
Net Book Value
£
16,200
2003
Machinery
18,000
3,600
14,400
2004
Machinery
18,000
5,400
12,600
(d)
Reducing Balance Method
2002
Depreciation - Machinery
£
1,800
2003
Depreciation - Machinery
1,620
2004
Depreciation - Machinery
1,458
Balance Sheet (extracts) as at 31 October
2002
Machinery
Cost
£
18,000
Total Depreciation
£
1,800
Net Book Value
£
16,200
2003
Machinery
18,000
3,420
14,580
2004
Machinery
18,000
4,878
13,122
Computer equipment
disposals
9,500
20.3
(a)
Computer Equipment Account
2001
Jan-01
Balance b/d
9,500
2004
Jan-01
(b)
Provision for Depreciation : Computer Equipment Account
2001
2001
Computer
equipment
Dec-31
Balance c/d
1,900
Jan-01
2002
Dec-31
Balance c/d
3,800
2002
Jan-01
Dec-31
Balance b/d
Profit and loss
1,900
1,900
3,800
2003
Jan-01
Dec-31
Balance b/d
Profit and loss
3,800
1,900
5,700
2004
Jan-01
Balance b/d
5,700
3,800
2003
Dec-31
Balance c/d
5,700
5,700
2004
Jan-01
Computer equipment
disposals
5,700
1,900
Chapter 20: Double entry for depreciation and disposal of a fixed asset
Profit and Loss Account (extracts) for the year ended 31 October
55
(c)
Computer Equipment Disposals Account
2004
Jan-01
Dec-31
Computer
Profit and loss
2004
Jan-01
Jan-01
9,500
450
9,950
Depreciaiton
Bank
5,700
4,250
9,950
(d)
Chapter 20: Double entry for depreciation and disposal of a fixed asset
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
2001
Computer Equipment
Cost
£
9,500
Total Depreciation
£
1,900
Net book value
£
7,600
2002
Computer Equipment
9,500
3,800
5,700
2003
Computer Equipment
9,500
5,700
3,800
Provision for depreciation
9,700
Bank
1,850
20.4X
(a)
Motor Van Disposals Account
Motor Van
12,000
Profit and loss : loss on sale
12,000
450
12,000
(b)
Machinery Disposals Account
Machinery
Profit and loss : profit on sale
27,900
2,770
Provision for depreciation
19,400
Bank
11,270
30,670
30,670
(c)
Fixtures Disposals Account
Fixtures
8,420
Provision for depreciation
Bank
Profit and loss : loss on sale
8,420
56
7,135
50
1,235
8,420
(d)
Buildings Disposals Account
Buildings
200,000
Profit and loss : profit on sale
59,000
Provision for depreciation
110,000
Bank
149,000
259,000
259,000
20.5
(a)
Straight Line Method
_________________
No. of Years
35,000 2 11,000
£6,000 per annum
______________
Cost 2 Scrap Value
(b)
Provision for Depreciation - Vehicles Account
Dr
2005
Mar-31
2006
Mar-31
Balance c/d
Balance c/d
£
7,000
12,600
12,600
2005
Mar-31
Profit and loss
7,000
Balance b/d
7,000
Apr-01
2006
Mar-31
Profit and loss
5,600
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.
Cr
20.6X
(a)
RIALTO TRADERS
Plant and Machinery Account
2007
May 1
Balance b/d
500,000
2007
Dec 31
2008
Apr 30
500,000
2008
May 1
Balance b/d
Plant and machinery
disposals
200,000
Balance c/d
300,000
500,000
Chapter 20: Double entry for depreciation and disposal of a fixed asset
4
300,000
57
(b)
Motor Vehicles Account
2007
May 1
2008
Feb 1
May 1
Balance b/d
200,000
Bank
100,000
300,000
Balance b/d
300,000
2008
Apr 30
Balance c/d
300,000
300,000
(c)
Provision for Depreciation - Plant and Machinery Account
Chapter 20: Double entry for depreciation and disposal of a fixed asset
2007
Dec 31
58
2008
Apr 30
Plant and MachineryDisposals
150,000
Balance c/d
80,000
230,000
2007
May 1
Balance b/d
200,000
2008
Apr 30
Profit and Loss
30,000
230,000
May 1
Balance b/d
80,000
(d)
Plant and Machinery - Disposal Account
2007
Dec 31
Plant and Machinery
200,000
2007
Dec 31
Dec 31
Dec 31
200,000
Provision for
Depreciation
Bank
Profit and Loss
150,000
40,000
10,000
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.
Answers
Chapter 21: Bad debts and provision for
doubtful debts
(a)
Hart & Partners
Dr
Bad Debts Account
2009
May-16
Jul-31
Nov-09
S Bayley
J Carter
T Roche
2009
Dec-31
550
223
467
1,240
Dr
Profit & loss
Provision For Doubtful Debts Account
Cr
Profit & loss
520
Profit and Loss Account for the year ended 31 December 2009 (extracts)
Gross profit
Less Expenses
Bad debts written off
Provision for doubtful debts
(c)
1,240
520
1,760
26,000
520
25,480
Balance Sheet as at 31 December 2009 (extract)
Current Assets
Debtors
Less Provision for doubtful debts
21.2
1,240
1,240
2009
Dec-31
(b)
Cr
Date
31-Dec
2007
2008
2009
2010
Total debtors
7,000
8,000
6,000
7,000
Profit and
loss
70
10
20
10
Dr/Cr
Dr
Dr
Cr
Dr
Final figure for
balance sheet
6,930 (net)
7,920 (net)
5,940 (net)
6,930 (net)
Chapter 21: Bad debts and provision for doubtful debts
21.1
59
21.3X
Bad Debts
2007
31 Dec
2008
31 Dec
Debtors
Debtors
298
2007
31 Dec
Profit and loss a/c
298
386
2008
31 Dec
Profit and loss a/c
386
Profit and loss a/c
344
Profit and loss a/c
477
2009
31 Dec
Debtors
344
2009
31 Dec
2010
31 Dec
Debtors
477
2010
31 Dec
Provision for Doubtful Debts
2007
31 Dec
2008
31 Dec
100
Balance c/d
Balance c/d
130
2007
31 Dec
Profit and loss a/c
100
2008
1 Jan
31 Dec
Balance b/d
Profit and loss a/c
100
30
130
2009
1 Jan
Balance b/d
130
Chapter 21: Bad debts and provision for doubtful debts
130
60
2009
31 Dec
31 Dec
Profit and loss a/c
Balance c/d
15
115
130
130
2010
31 Dec
Balance c/d
150
2010
1 Jan
31 Dec
Balance b/d
Profit and loss a/c
115
35
150
2011
1 Jan
Balance b/d
150
150
Profit and Loss Accounts
for the years ended 31 December (extracts)
2007
Bad debts
Provision for doubtful debts
2008
Bad debts
Provision for doubtful debts
2009
Bad debts
2010
Bad debts
Provision for doubtful debts
£
298
100
£
386
30
344
477
35
2009
Provision for doubtful debts
15
Balance Sheet as at 31 Decemeber (extracts)
Debtors
Less Provision for doubtful debts
£
12,000
100
11,900
2008
Debtors
Less Provision for doubtful debts
15,000
130
14,870
2009
Debtors
Less Provision for doubtful debts
14,000
115
13,885
2010
Debtors
Less Provision for doubtful debts
18,000
150
17,850
2007
£
21.4X (a)
The Journal
Apr30
Bad Debts
A. Carter
Being bad debt written off
Debit
Credit
£
500
£
500
(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.
Chapter 21: Bad debts and provision for doubtful debts
Date
61
Answers
Chapter 22: Accruals, prepayments and other
adjustments for financial statements
22.1
Chapter 22: Accruals, prepayments and other adjustments for financial statements
(a)
C Homer
Rent Account
2008
Dec-31
Dec-31
Bank
Owing c/d
2008
Dec-31
(b)
Profit and loss
2,000
2,000
2009
Jan-01
Owing b/d
400
Profit and loss
Prepaid c/d
635
265
900
Profit and loss
7,381
Insurance Account
2008
Dec-31
Bank
900
2008
Dec-31
Dec-31
900
2009
Jan-01
Prepaid b/d
(c)
265
Motor Expenses Account
2008
Dec-31
Dec-31
Bank
Owing c/d
7,215
166
7,381
2008
Dec-31
7,381
2009
Jan-01
(d)
Owing b/d
166
Rates Account
2008
Jan-01
Bank
Jul-01
Bank
750
2008
Dec-31
Profit and loss
1,125
Dec-31
Prepaid c/d
1,875
2009
Jan-01
Prepaid b/d
(e)
1,500
375
1,875
375
Rents Receivable Account
2008
Dec-31
Dec-31
62
1,600
400
2,000
Profit and loss
In advance c/d
4,800
1,600
6,400
2008
Apr-15
Dec-15
Bank
Bank
2,000
4,400
6,400
2009
Jan-01
In advance b/d
1,600
22.2
(a)
T Norton
General Expenses Account
Bank
Owing c/d
615
56
671
2009
Dec-31
671
671
2010
Jan-01
(b)
Profit and loss
Owing b/d
56
Telephone Account
2009
Dec-31
Dec-31
Bank
Owing c/d
980
117
1,097
2009
Dec-31
1,097
1,097
2010
Jan-01
(c)
Profit and loss
Owing b/d
117
Bank
Owing c/d
3,056
175
3,231
Commission Received Account
2009
Dec-31
Profit and loss
3,231
2009
Dec-31
Dec-31
3,231
2010
Jan-01
Owing b/d
(d)
175
Carriage Outwards Account
2009
Dec-31
Dec-31
Bank
Owing c/d
666
122
788
2009
Dec-31
788
788
2010
Jan-01
(e)
Profit and loss
Owing b/d
122
Insurance Account
2009
Jan-01
Oct-01
Bank
Bank
2010
Jan-01
Prepaid b/d
1,080
1,080
2,160
2009
Dec-31
Dec-31
Profit and loss
Prepaid c/d
1,440
720
2,160
Chapter 22: Accruals, prepayments and other adjustments for financial statements
2009
Dec-31
Dec-31
720
63
22.3X
(a)
T Dale
Stationery Account
2008
01 Jul
2009
30 Jun
Stock b/d
Cash and bank
Chapter 22: Accruals, prepayments and other adjustments for financial statements
(b)
290
855
1,145
Profit and loss
Stock c/d
800
345
1,145
General Expenses Account
2009
30 Jun
30 Jun
Cash and bank
Owing c/d
(c)
590
90
680
2008
01 Jul
2009
30 Jun
Owing b/d
Profit and loss
64
616
680
Rent and Rates Account
2008
01 Jul
2009
30 Jun
30 Jun
Cash and bank
Owing c/d
3,890
360
2009
30 Jun
30 Jun
Owing b/d:
Rent
Rates
Profit and loss
Rent prepaid
and c/d
4,250
(d)
160
205
3,635
250
4,250
Motor Expenses Account
2009
30 Jun
Cash and bank
4,750
30 Jun
Owing c/d
375
5,125
(e)
2008
01 Jul
Owing b/d
2009
30 Jun
Profit and loss
180
4,945
5,125
Commission Receivable Account
2008
01 Jul
2009
30 Jun
Owing b/d
Profit and loss
80
915
995
64
2009
30 Jun
2009
30 Jun
2009
30 Jun
30 Jun
Cash and bank
Owin c/d
850
145
995
C Cainen
Trading and Profit and Loss Account
for the year ended 31 December 2009
£
Sales
Less cost of goods sold
Opening stock
Add Purchases
Less Closing stock
Gross Profit
Less Expenses
Rent (640 2 160)
Wages and salaries (2,140 1 290)
Insurance (590 2 190)
Bad debts
Telephone (300 1 110)
General Expenses
Net Profit
22.5
£
18,590
2,050
11,170
13,220
3,910
9,310
9,280
480
2,430
400
270
410
180
4,170
5,110
K Tyler
Trading and Profit and Loss Account for the year ended 31 December 2010
Sales
Less Sales returns
Less cost of goods sold
Opening stock
Add Purchases
Less Closing stock
Gross Profit
Less Expenses
Wages and salaries (£4,960 1 £510)
Motor expenses
Rent and rates (£1,200 2 £160)
Discounts allowed
Lighting expenses (£580 1 £170)
Computer running expenses (£1,210 2 £140)
General expenses
Depreciation : Motor vehicles
Net Profit
£
54,190
200
8,620
30,560
39,180
12,120
5,470
2,120
1,040
290
750
1,070
360
700
£
53,990
27,060
26,930
11,800
15,130
Chapter 22: Accruals, prepayments and other adjustments for financial statements
22.4
65
22.6X
J Sears
Trading and Profit and Loss Account
for the year ended 31 December 2010
Chapter 22: Accruals, prepayments and other adjustments for financial statements
Sales
Less Sales returns
Less Cost of goods sold:
Opening stock
Add Purchases
Less Purchase returns
Less Closing stock
Gross Profit
Less Expenses
Wages and salaries (7,200 1 450)
Telephone (200 2 20)
Bad debts
Provision for doubtful debts (1,960 3 10% 2 160)
Depreciation:
Store fittings
Motor van
Net Profit
20,000
70,000
90,000
1,240
88,760
24,000
64,760
14,240
7,650
180
40
36
800
1,200
9,906
4,334
J Sears
Balance Sheet as at 31 December 2010
Cost
Fixed Assets
Store fittings
Motor van
8,000
6,000
14,000
Current Assets
Stock
Debtors
Less Provision for doubtful debts
Prepaid expenses
Bank
1,960
196
Less Current Liabilities
Creditors
Expenses owing
Net current assets
1,400
450
Financed by:
Capital
Balance 1.1.2010
Add Net profit
Less Drawings
66
80,000
1,000
79,000
Depreciation
Net Book
Value
800
1,200
2,000
7,200
4,800
12,000
24,000
1,764
20
600
26,384
1,850
24,534
36,534
35,800
4,334
40,134
3,600
36,534
Answers
Chapter 23: Incomplete records
23.1
(a)
Total Debtors
Balances b/d
Sales (difference)
2,760
14,940
17,700
Cash
Balances c/d
14,610
3,090
17,700
Total Creditors
Cash
Balances c/d
(b)
9,390
1,320
10,710
Balances b/d
Purchases (difference)
1,080
9,630
10,710
K Rogers
Trading Account for the year ended 31 October 2009
£
Sales
Less Cost of Goods sold
Opening Stock
Add Purchases
2,010
9,630
11,640
2,160
Less Closing Stock
Gross Profit
23.2X
£
14,940
9,480
5,460
2008
1 Jun
2009
31 May
Balance b/d
Sales
5,670
45,550
51,220
2009
31 May
Bank
45,112
31 May
Balance c/d
6,108
51,220
Balances b/d
3,410
Total Creditors
2009
31 May
31 May
Bank
Balances c/d
29,375
4,126
33,501
2008
1 Jun
2009
31 May
Purchases
30,091
33,501
Chapter 23: Incomplete records
Total Debtors
Trading Account for the year ended 31 May 2009
£
Sales
Less Cost Of Goods Sold
Opening Stock
Add Purchases
Less Closing Stock
Gross Profit
11,590
30,091
41,681
13,425
£
45,550
28,256
17,294
67
23.3 (a) Capital is £6,000
(b)
D Lewinski
Balance Sheet as at 30 June 2009
£
Fixed assets
Plant
Fixtures
£
36,000
3,600
39,600
Current assets
Stock
Debtors
Bank
Cash
13,500
9,300
6,000
1,350
30,150
Less Current Liabilities
Creditors
Net current assets
7,200
22,950
62,550
Financed by:
Capital
Cash introduction
Add Net profit
60,000
18,550
78,550
16,000
Less Drawings
62,550
23.4
J Marcano
Statement of Affairs as at 31 August 2009
Chapter 23: Incomplete records
£
68
Fixed assets
Fixtures
Motor Van
Current assets
Stock
Debtors
Bank
Cash
£
3,500
3,500
7,000
16,740
11,890
2,209
115
30,954
Less Current liabilities
Creditors
9,952
21,002
28,002
Statement of Affairs as at 31 August 2009
£
Fixed assets
Fixtures
Less Depreciation
Motor Van
Less Depreciation
£
5,500
300
3,500
700
Current assets
Stock
Debtors
Bank
Cash
£
5,200
2,800
8,000
24,891
15,821
72
84
40,868
Less Current liabilities
Trade creditors
Expenses owing
Bank overdraft
Net current assets
6,002
236
165
6,403
34,465
42,465
Capital
Balance as at 31/08/2009
Add Cash introduced
Add Net profit
(C)
(B)
Less Drawings
28,002
12,800
9,223
50,025
7,560
(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.
42,465
23.5X
(a)
Total Debtors Account
Dr
2008
1 Apr
2009
31 Mar
Balances b/d
Cr
2,980
Sales
11,520
2009
31 Mar
31 Mar
Cash
Balances
(difference) c/d
14,500
Dr
2009
31 Mar
31 Mar
14,500
Total Creditors Account
Cash
Balance (difference) c/d
7,780
2,220
10,000
10,820
3,680
2008
1 Apr
2009
31 Mar
Chapter 23: Incomplete records
(A)
Cr
Balance b/d
1,880
Purchases
8,120
10,000
69
(b)
A Hanson
Calculation of Capital as at 31 March 2008 and 31 March 2009
31.3.2008
£
1,460
600
2,320
60
2,980
7,420
1,880
5,540
Bank
Office furniture
Stock
Cash
Debtors
Less Creditors
Capital
(c)
Capital as at 31 March 2008
Add Net profit
(B)
(A)
31.3.2009
£
1,740
500
2,620
80
3,680
8,620
2,220
6,400
£
5,540
3,400
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.
23.6X
(a) (i)
Total Debtors Account
Chapter 23: Incomplete records
Dec-01
70
Balances b/d
Sales
450
7,628
8,078
Calculation of Sales
Credit Sales
Cash Sales
Drawings 12 3 £1,500
£
7,628
200,552
18,000
226,180
Nov 30
Nov 30
Bank
Balance c/d
7,500
578
8,078
(ii)
Rent Account
Dec 01
Nov 30
Balance b/d
Bank
Nov 30
Nov 30
Bank
Balance c/d
(iii)
Nov 30
Nov 30
Profit and loss
Balance c/d
8,760
490
9,250
Nov 30
Profit and loss
700
Dec 1
Balance b/d
700
100
Loan Interest Account
600
100
700
he loan interest needs adjusting so that the amount incurred for the year is
T
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.
Chapter 23: Incomplete records
(b)
350
8,900
9,250
71
Answers
Chapter 24: Accounting for non-profit
making organisations
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'.
Chapter 24: Accounting for non-profit making organisations
(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 equivalent of a business's profit for a non-profit making organisation.
24.2
(a)
Horton Hockey Club
Receipts and Payments Account
for the year ended 30 June 2009
Receipts
Bank balance b/f
Subscriptions
Donations
Receipts from raffles
2,715
8,570
1,500
3,816
1,598
3,891
392
4,800
General expenses
419
Prizes for raffles
624
Bank balance c/f
4,877
16,601
16,601
(b)
Horton Hockey Club
Income and Expenditure Account
for the year ended 30 June 2009
Income:
Subscriptions (8,570 1 160)
Donations
Profit on raffles (3,816 2 624)
Less Expenditure:
Teams' travel expenses
Groundsman's wages (3,891 1 75)
Postage and stationery
Rent of pitches and club house (4,800 1 400)
General expenses
Surplus of income over expenditure
72
Payments
Teams' travel expenses
Groundsman wages
Postage and stationery
Rent of pitches and club house
8,730
1,500
3,192
13,422
1,598
3,966
392
5,200
419
11,575
1,847
24.3X
(a)
Superball Football Club
Receipts and Payments Account for the year ended 31 May 2009
Receipts
Cash & bank balnces b/d
Subscriptions
Disco receipts
Collections at matches
Prize money
905
8,124
3,149
5,090
1,000
Payments
Hire of transport
Ground maintenance costs
Groundsman's wages
Committee expenses
Costs of disco
3,710
1,156
5,214
906
1,112
Rent of ground
2,450
General expenses
814
Cash & bank balances c/d
18,268
2,906
18,268
Superball Football Club
Income and Expenditure Account for the year ended 31 May 2009
Income:
Subscriptions (8,124 2 160 1 94)
Profit on disco (3,149 2 1,112)
Collections at matches
Prize money received
8,058
2,037
5,090
1,000
16,185
Less Expenditure:
Hire of transport (3,710 1 90)
3,800
Ground maintenance costs
1,156
Groundsman's wages
5,214
Committee expenses (906 1 170)
1,076
Rent of ground (2,450 2 200)
2,250
General expenses
Surplus of income over expenditure
814
14,310
1,875
Chapter 24: Accounting for non-profit making organisations
(b)
73
24.4
(a) Accumulated fund as at 1 June 2007:
£
Bar Stocks
88
Equipment
340
Bank Balance
286
714
(b)
Down Town Sports and Social Club
Bar Trading Account
Year Ended 31 May 2008
£
Bar Takings
Less Cost of goods sold
Opening stock
£
463
88
Add Purchases
397
485
Chapter 24: Accounting for non-profit making organisations
Less Closing Stock
74
101
384
79
Gross Profit
(c)
Down Town Sports and Social Club
Income and Expenditure Account
Year Ended 31 May 2008
£
Income
Subscriptions (135 1 14)
Net proceeds of jumble sale
Net proceeds of dance
£
149
91
122
Gross profit from bar
79
441
Less Expenditure
Wages
198
Hire of rooms
64
Loss on sale of equipment (92 2 80)
12
Depreciation : equipment
30
Surplus of income over expenditure
304
137
24.5X
(a)
Sevenoaks College Drama Society
Trading Account
Year Ended 31 December 2010
£
Sale of refreshments
Less cost of goods sold
Opening stock
100
Add Purchases
845
£
1,200
945
Less Closing Stock
165
780
420
Gross Profit
(b)
Income
Subscriptions
Profit on sale of refreshments
Ticket sales
£
£
1,600
420
4,000
6,020
Expenditure
Hire of costumes (1,500 - 650)
850
Rent of theatre
750
Administrative expenses
440
*Depreciation of scenery
2,000
4,040
Surplus of income over expenditure
1,980
(c)
Balance Sheet as at 31 December 2010
£
Fixed Assets
Scenery (at valuation)
Current Assets
Stock of refreshments
Less Current Liabilities
Subscriptions in advance
Bank Overdraft
£
£
12,500
165
90
595
685
(520)
11,980
Represented by
Accumulated Fund
Add Surplus of income over expenditure
* Workings - Scenery - Balance as at 1 January 2010
Add Purchase of new scenery
Less Value as at 31 December 2010
Depreciation
Chapter 24: Accounting for non-profit making organisations
Income and Expenditure Account
Year Ended 31 December 2010
10,000
1,980
11,980
7,500
7,000
14,500
14,000
2,000
75
Chapter 24: Accounting for non-profit making organisations
24.6X (a) Accumulated fund – this is a form of capital account for a non-profit making
organisation and represents the net worth of club. It can be found by
deducting liabilities from the assets.
A surplus is the amount that income exceeds expenditure and is the same as
the profit made by a business.
(b) In the balance sheet subscriptions in arrears would appear under Current
Assets and rent of cricket pitch accrued under Current Liabilities.
(c) (i) Receipts and payments account – is a summary of the cash book for a
club or society and details all cash received and payments made.
(ii) Current Assets.
(iii) Payment for the purchase of a fixed asset.
(iv) Depreciation of a fixed asset.
(d) Since the donation is a substantial amount it would be added to the
accumulated fund in the balance sheet. The reason for this is that the
donation is not a regular income but a one off receipt and as such should
not be shown on the income expenditure account.
76
Answers
Chapter 25: Manufacturing accounts
25.1
E Smith
Manufacturing and Trading Account
for the year ended 31 March 2009
Less Stock of raw materials 31.3.2009
Cost of raw materials consumed
Manufacturing wages
Prime cost
Add factory overhead expenses
Rent and rates
Power
2,300
6,220
Other expenses
1,430
£
2,400
21,340
321
24,061
2,620
21,441
13,280
34,721
Less Work in progress 31.3.2009
9,950
44,671
955
45,626
870
Production cost of goods completed c/d
44,756
Sales
69,830
Add Work in progress 1.4.2008
Less Cost of goods sold
Stock finished goods 1.4.2008
Add Production cost of goods completed b/d
Less Stock finished goods 31.3.2009
Gross profit
6,724
44,756
51,480
7,230
44,250
25,580
Chapter 25: Manufacturing accounts
£
Stock of raw material 1.4.2008
Add Purchases
Carriage inwards
77
25.2X
P Lucas
Manufacturing, Trading and Profit and Loss Account
for the year ended 30 September 2009
£
£
Stock of raw materials 1.10.2008
Add Purchases
Carriage inwards
38,720
2,720
Less Stock of raw materials 30.9.2009
Cost of raw materials consumed
Manufacturing wages
Prime cost
Factory Overhead Expenses
Power
Factory expenses
Depreciation: Plant and machinery
6,120
12,650
7,560
Add Work-in-progress 1.10.2008
Less Work-in-progress 30.9.2009
Production cost of goods completed c/d
Sales
Chapter 25: Manufacturing accounts
78
86,840
99,220
14,570
Less Stock of finished goods 30.9.2009
Gross profit c/d
Less Expenses:
Salesmen's salaries and expenses
26,420
Office and administration expenses
25,910
Net Profit
26,330
86,230
3,070
89,300
2,460
86,840
12,380
Add Production cost of goods completed b/d
Office equipment
41,440
49,900
10,970
38,930
20,970
59,900
174,610
Less Cost of goods sold:
Stock of finished goods 1.10.2008
Delivery van expenses
Advertising
Depreciation:
Delivery van expenses
£
8,460
84,650
89,960
5,890
5,080
3,040
807
3,847
67,147
22,813
25.3X
(a)
Joey Peterson
Manufacturing Account for the year ended 30 June 2010
£
Stock of raw materials 1.7.2009
Add Purchases
Less Stock of raw material 30.6.2010
Cost of raw materials consumed
Direct Wages (450,000 1 8,900)
Direct factory power
Prime cost
Add Indirect manufacturing cost
Factory rent and rates
Indirect factory wages
General expenses
96,000
98,600
14,400
Insurance (66,900 2 6,900) 3 __ 13
20,000
Depreciation : Plant and Machinery
50,000
Add Work in progress 1.7.2009
Less Work in progress 30.6.2010
£
81,600
314,000
395,600
94,500
301,100
458,900
40,000
800,000
279,000
1,079,000
125,300
1,204,300
154,300
Production Cost
1,050,000
(b)
Sales
Less Cost of goods sold
Stock of finished goods 1.7.2009
Add Production Cost
Less Stock of furnished goods 30.6.2010
2,000,000
115,440
1,050,000
1,165,440
85,440
Gross Profit
1,080,000
920,000
25.4X
(a) (i) Cost of raw materials consumed £560,000
(ii) Prime cost £1,280,000
(iii) Total factory overheads £740,000
(iv) Value of closing stock of work in progress £80,000
£3,000,000
(b) (i) Selling price of one engine 1 £2,000,000 1 50% 5 _____________
1,000 engines
5 £3,000
(ii) Total gross profit 5 750 engines 3 £1,000 5 £750,000
(iii) Value of closing stock of finished goods based on factory cost of
production : 250 engines 3 £2,000 5 £500,000
Chapter 25: Manufacturing accounts
Trading Account for the year ended 30 June 2010
79
Answers
Chapter 26: Partnership accounts
26.1
(a)
Stead and Jackson
Appropriation Account
for the year ended 31 December 2010
£
45,000
5,000
40,000
Net profit
Less Salary: Jackson
Balance of profits shared:
1
__
Stead
2
Jackson
20,000
1
__
20,000
2
40,000
(b)
Capital Account
Stead
Jackson
2010
Dec 31 Balance b/d
Stead
Jackson
24,000
16,000
Stead
Jackson
2,300
20,000
22,300
3,500
5,000
20,000
28,500
7,300
9,500
(c)
Chapter 26: Partnership accounts
Current Accounts
2010
Dec 31 Drawings
Dec 31 Balances c/d
Jackson
15,000
7,300
19,000
9,500
22,300
28,500
2010
Dec 31 Balance b/d
Dec 31 Salary
Dec 31 Share of profits
2011
Jan 1 Balance b/d
26.2X (a)
Wain, Brown and Cairns
Appropriation Account for the year ended 31 March 2010
£
Net profit
Less: Salaries
Wain
10,000
Brown
8,000
Balance of profits shared:
Wain 50%
80
Stead
£
60,000
18,000
42,000
21,000
Brown 30%
12,600
Cairns 20%
8,400
42,000
(b)
Capital Accounts
Wain
Brown
Cairns
2010
Mar 31
Balance b/d
Wain
Brown
Cairns
30,000
50,000
70,000
Wain
Brown
Cairns
2,400
3,100
5,700
10,000
8,000
—
21,000
12,600
8,400
Current Accounts
Wain
2010
Mar 31
Drawings
Mar 31
Balances c/d
Brown
Cairns
12,000
15,050
14,980
21,400
8,650
—
2010
Mar 31
Balance b/d
Mar 31 Salaries
Mar 31 Share
of profits
Mar 31
Balances c/d
33,400
2010
Apr 1
Balance b/d
—
23,700
—
14,980
880
2010
Apr 1
Balance b/d
880
33,400
23,700
14,980
21,400
8,650
—
26.3
Simpson and Young
Tradign and Profit and Loss Appropriation Account
for the year ended 30 June 2010
Opening stock
18,000
Add Purchases
184,980
202,980
19,000
Less Closing stock
Gross profit
Less Expenses:
Wages and salaries (32,700 500)
Rent, Rates and insurance (3,550 250)
Electricity
Stationery and printing
Motor expenses
General office expenses
Depreciation: Motor van (20% of 16,000)
Office equipment (10% of 5,600)
Net profit
Less interest on capital:
Simpson (10% of 50,000)
Young (10% of 20,000)
Share of profits:
Simpson 3/5ths
Young 2/5ths
33,200
3,300
980
420
3,480
1,700
3,200
560
5,000
2,000
10,020
6,680
£
254,520
183,980
70,540
Chapter 26: Partnership accounts
£
Sales
Less Cost of sales:
46,840
23,700
7,000
16,700
16,700
81
Simpson and Young
Balance Sheet as at 30 June 2010
Cost
Fixed assets
Buildings
Office equipment
Motor vans
Chapter 26: Partnership accounts
Current assests
Stock
Debtors
Prepayments
Cash at bank
Less Current liabilites
Creditors
Accruals
Net current assets
Financed by:
Capital accounts
Balance b/f
82
Current accounts
Balance b/f
Add Share fo profit
Add Interest on capital
Less Drawings
£
Accumulated
Depreciation
£
28,000
8,400
16,000
52,400
3,360
8,200
11,560
19,000
28,000
250
7,250
54,500
15,200
500
15,700
28,000
5,040
7,800
40,840
Simpson
50,000
Young
20,000
Total
70,000
640
10,020
5,000
15,660
10,000
5,660
300
6,680
2,000
8,980
5,000
3,980
9,640
79,640
(W1) Provision for depreciation on office equipment:
8,400 5,600 560 3,360
(W2) Provision for depreciation on motor vans:
(W1)
(W2)
38,800
79,640
Net Book
Value
£
16,000 11,000 3,200 8,200
26.4X
(a)
Michael and Morgan
Profit and Loss Account (Including Appropriation)
for the year ended 30 September 2009
£
£
385,000
15,000
400,000
Gross Profit
Add Discounts Received
Less Expenses
Administrative Expenses
Advertising (7,375 125)
Rent and rates (12,000 2 1,500)
Wages and salaries (135,000 5,000)
Depreciation - Shop fittings *
Net Profit
Less Salary - Michael
6,790
7,500
10,500
140,000
12,000
Share of profits: Michael 2/5ths
Morgan 3/5ths
176,790
223,210
30,000
193,210
77,284
115,926
193,210
2
(b)
Balance b/d
Drawings
Balance c/d
1,500
9,650
96,259
107,409
Sep 30
Sep 30
Sep 30
Salary
Profit share
Advertising
30,000
77,284
125
107,409
Oct 01
Balance b/d
96,259
(c)
Michael and Morgan
Balance Sheet Extract as at 30 September 2009
Micheal
50,000
Morgan
40,000
(1,500)
2,000
Add Share of Profits
77,284
115,926
Add Salary
30,000
2
Capital Accounts Balance
Current Accounts
Balance
Add Advertising
Less Drawings
125
2
105,909
117,926
9,650
8,200
96,259
109,726
Total
90,000
Chapter 26: Partnership accounts
Michael — Current Account
Oct 01
Sep 30
Sep 30
205,985
295,985
* Workings
Shop fittings : Cost
Less : Depreciation to date
£
76,000
28,000
48,000
Reducing Balance Method 5 25% 3 £48,000 5 £12,000
83
Answers
Chapter 27: Limited company accounts
27.1
(a)
C Blake Ltd
Appropriation Account for the year ended 31 December 2009
£
Net profit b/d
Less Appropriations
Transfer to General Reserve
Dividends payable:
£
11,340
1,500
1,000
7,500
Preference dividend 10% (£10,000 3 10%)
Ordinary dividend 12.5% (£60,000 3 12.5%)
10,000
1,340
Retained profits carried forward to next year
C Blake Ltd
Balance Sheet as at 31 December 2009
(b)
Fixed Assets
Buildings at cost
Equipment at cost
Less Accumulated depreciation
£
£
45,000
4,500
£
50,000
40,500
Chapter 27: Limited company accounts
90,500
Current Assets
Stock
Debtors
Less Provision for doubtful debts
8,800
4,120
350
Bank (balancing figure)
Cash
3,770
9,660
2,160
24,390
Less Creditors: amounts falling due within one year
Creditors
Dividends payable (£1,000 1 £7,500)
3,550
8,500
12,050
12,340
102,840
Less Creditors: amounts due after more than one year
30,000
Debentures
72,840
Financed by:
Share Capital
Called-up share capital
60,000 ordinary £1 shares
10,000 preference £1 shares
Revenue reserves
General reserve
Profit and loss account
60,000
10,000
1,500
1,340
70,000
2,840
72,840
Note: The Authorised Share Capital is 90,000 £1 ordinary shares and 10,000 - 10% preference shares.
84
27.2X
(a)
Reynolds Ltd
Profit and Loss Appropriation Account for the year ended 30 September 2010
£
Net profit
Add Retained profits b/f from last year
Less Appropriations:
General reserve
Dividends payable:
Ordinary shares — (150,000 3 6p) Paid
— (150,000 3 14p) Proposed
Preference shares — (7% 3 50,000) Proposed
Retained profits carried to next year
£
70,000
30,000
100,000
8,000
9,000
21,000
3,500
41,500
58,500
(b)
Reynolds Ltd
Balance Sheet as at 30 September 2010 (Extract)
£
Financed by:
Called-up share capital
Preference shares
Ordinary shares
50,000
150,000
200,000
53,000
58,500
111,500
311,500
Note: The Authorised Share Capital is 200,000 £1 ordinary shares and 50,000 - 7% preference shares.
Chapter 27: Limited company accounts
Revenue Reserves
General Reserve (45,000 1 8,000)
Profit and loss account
£
85
27.3
Chang Ltd
Trading and Profit and Loss Account
for the year ended 31 December 2010
Sales
Less Cost of goods sold:
Opening stock
Add Purchases
316,810
25,689
201,698
Less Closing stock
227,387
29,142
Gross profit
Less Expenses
Wages and salaries (54,207 1 581)
Rent (4,300 2 300)
Lighting expenses
Bad debts
Provision for doubtful debts (938 2 861)
General expenses
Deprecation: Machinery (55,000 3 10%)
198,245
118,565
54,788
4,000
1,549
748
77
32,168
5,500
98,830
Net profit
Add Retained profits b/f from last year
19,735
34,280
Less Proposed dividend
Retained profits c/f to next year
54,015
10,000
44,015
Chapter 27: Limited company accounts
Balance Sheet as at 31 December 2010
Fixed Assets
Premises
Machinery
Less Aggregated depreciation (15,800 1 5,500)
Current Assets
Stock
Debtors
Less Provision for doubtful debts
65,000
55,000
21,300
33,700
98,700
29,142
21,784
938
Prepayments
Bank
20,846
300
23,101
73,389
Less Creditors falling due wihtin one year
Dividend payable
Creditors
Expenses owing
Net current assets
10,000
17,493
581
28,074
45,315
144,015
Financed by:
Capital and reserves
Called -up share capital
Revenue reserves
Profit and loss account
100,000
44,015
144,015
86
27.4X
(a)
Wayland Limited
Appreciation Account for the year ended 31 December 2010
£ '000's
Net profit
Add Profit and Loss Balance 1st January 2010
Less Appropriations
Transfer to general reserve
Preference dividend (6% 3 250,000)
Ordinary dividend 2 (Interim Dividend)
2 (8% 3 750,000)
Retained profits carried forward
25
15
20
60
£ '000's
250
195
445
120
325
(b)
Cost
Fixed Assets
Land and buildings
Fixtures and fittings
Motor vehicles
Current Assets
Stock
Debtors
Bank
Current Liabilities
Creditors
Value added tax
Dvidends Payable:
Preference shares
Ordinary shares
Working capital
£ '000's
Aggregate
Depreciation
£ '000's
Net Book
Value
£ '000's
1,500
50
—
10
1,500
40
85
15
70
1,635
25
1,610
165
103
107
375
135
25
15
60
235
140
1,750
Creditors: amounts falling due after one year 5%
debentures
250
1,500
Capital and Reserves
Called up capital
Ordinary shares
6% Preference shares
Capital reserves
Share premium
Revenue Reserves
General reserve
Profit and loss account shareholders' funds
750
250
Chapter 27: Limited company accounts
Wayland Limited
Balance Sheet as at 31 December 2010
1,000
100
75
325
400
1,500
87
Answers
Chapter 28: Analysis and interpretation
of financial statements
N Ltd
28.1 (a) M Ltd
(i) Current ratio
£200,000
________
4:1
£50,000
£130,000
________
2:1
£65,000
(ii) Acid test ratio
£200,000 2 £100,000
___________________
2:1
£50,000
£130,000 2 £64,000
__________________
1:1
£65,000
(iii) Stockturn
£288,000
______________________
2.6 times
Chapter 28: Analysis and interpretation of financial statements
£120,000 1 £100,000 4 2
88
£187,500
____________________
3.0 times
£60,000 1 £64,000 4 2
(iv) Debtors : Sales ratio
£60,000
________
12 months 2 months
£360,000
£62,500
________
12 months 3 months
£250,000
(v) Creditors : Purchases ratio
£50,000
________
12 months 2.2 months
£268,000
£65,000
________
12 months 4 months
£191,500
(vi) Gross profit %
£72,000
________
100% 20%
£360,000
£62,500
________
100% 25%
£250,000
(vii) Net profit %
£43,200
________
100% 12%
£360,000
£35,000
________
100% 14%
£250,000
(viii) Rate of return on shareholders' sunds
£43,200
________
100% 12.3 %
£350,000
£35,000
________
100% 13.7%
£255,000
(b) Briefly N Ltd gives a better return to shareholders because of (viii) above.
Reasons include:
• M Ltd's current ratio is higher. This indicates that M Ltd is in a better liquidity
position.
• N Ltd’s stock turnover is higher than that of M Ltd. This shows that N Ltd manages
its sales performance more effectively.
• The gross profit percentage of N Ltd is 5% higher than that of M Ltd. This is due to
better purchasing and selling prices. Net profit margins differ by a smaller margin
of 2% suggesting, that M Ltd has tighter control of its overhead expenses when
compared with its sales volume (8% compared with 11%)
(a)
Cruise Furnishings
Holmes Supplies
(i) Gross profit margin
600
_____
100 33 __1 %
600
_____
100 25%
(ii) Net profit margin
150
_____
100 8.33%
1,800
160
_____
100 6.67%
(iii) Current ratio
210
____
3.18 : 1
66
180
____
3:1
1,800
3
2,400
2,400
60
(b) Rate of stock tunover for Cruise Furnishings
1200
_____
10 Times a year
120
(c)
Profitability
Both businesses are making good net profits, Cruise £150,000 and Holmes
£160,000. However, both the gross profit percentage and net profit percentage
for Cruise is better than Holmes, with the net profit percentage being 8.33% for
Cruise against Holmes 6.67%. This could be due to Cruise selling goods at a higher
price and their cost of sales being lower.
Liquidity
The current ratio for both Cruise and Holmes are very similiar with cruise being
slightly higher at 3.18 : 1 against Holmes 3 : 1. If we calculate the acid test, i.e, we
remove stock from the calculation,
Cruise
210 2 111
__________
1.5 : 1
66
Holmes
180 2 120
__________
1:1
60
then Cruise is in a stronger position since it could raise £1.50 for every £1 owed
compared to Holmes who could raise £1 for every £1 of debt.
Conclusion
Whilst Holmes has a greater turnover than Cruise the company is not as
profitable. In terms of liquidity again Cruise is in a stronger position which may in
part be due to Holmes long term liabilities of £2,070,000.
Chapter 28: Analysis and interpretation of financial statements
28.2
89
28.3X (a)
Year Ended
28.02.2009
29.02.2010
Net Profit Margin
Net profit
16,000
26,000
_________
35,000
____
100 45.71% ______
____
100 50%
____
100 ______
52,000
Sales
1
1
1
(b)
Mark — up
21,600
35,500
____________
Gross Profit
____
100 _______
100 161.19% ________
100 215.15%
Cost of Sales
1
*13,400
*2,900 1 14,500 2 4,000 5 13,400
**16,500
**4,000 1 19.500 2 7,000 5 16,500
(c)
Chapter 28: Analysis and interpretation of financial statements
Rate of stock turnover
90
13,400
16,500
Cost of sales
_____________
________________
_________________
2,900 1 4,000 4 2
4,000 1 7,000 4 2
Average Stock
3.88 times 3 times
(d)
Overall the profitability of the buisness is improving with the Net Profit % increasing
from 45.71% to 50%. Mark-up has also increased considerably from 161.19% to 215.15%.
However, the stock is taking longer to sell/turnover a decrease from 3.88 to 3 times
a year. This is possibly due to the business stock in hand increasing from £2,900 at the
beginning of the first financial year to £7,000 at the end of February 2010?
Answers
Chapter 29: Computers and
accounting systems
29.1
To:
From:
Date:
Re:
Director of Finance
Administrative Assistant
June 2010
Proposed Integrated Computerised Accounting System
Arguments against the new system
• The cost of the installation plus ongoing costs of maintenance and
updating software.
• Training costs of staff.
• Staff resentment of new system.
• System downtime may be disruptive.
• Fraudulent access can seriously affect business operation and
profitability.
• Security measures that are necessary.
• Health and safety issues associated with using computers.
29.2
Measures a medium-sized company may adopt to safeguard the security of its
financial data and records would include:
• All company’s financial information should be regarded as confidential
except where legislation states otherwise. Staff should be made aware of this
requirement in the company’s code of conduct.
• Staff should be allocated passwords to monitor accessibility to specific areas
of work.
• Passwords need to be changed frequently.
• Installation of anti-virus computer packages to prevent the threat of fraud.
• Ensure data is saved and backed up regularly.
• Store back-up data in an off-site location if deemed necessary.
Chapter 29: Computers and accounting systems
Points in favour of the new system:
• Faster data input and automatic processing.
• Greater accuracy especially via automatic processing.
• Documentation such as invoices, credit notes, statements, remittance
advices produced automatically.
• Up-to-date information on customers’ accounts, etc. is readily
available.
• Provides management information.
• The system may be linked to the internet to allow for transactions
such as ordering goods to be carried out electronically.
• Provides access to the organisation’s bank account via the internet.
• More efficient and makes better use of resources.
29.3X Refer to text, Sections 29.3 and 29.4.
91
Chapter 29: Computers and accounting systems
29.4X (a) Benefits to a small business when it has the use of internet facilities would
include:
• access to web sites to obtain further information in many areas including
competitors, product ranges, location of customers/suppliers etc
• transactions such as ordering, purchasing, selling, making payments to
customers and staff, receiving monies etc., can all be carried out online
• the use of email for correspondence is quick, efficient and cost effective.
92
(b) A web designer would bring many benefits to a business as follows:
• development of initial user-friendly web site
• maintain an up-to-date web site
• develop online facilities for business to offer online ordering and purchasing
from suppliers and sales to customers
• promote a range of company products/services over a wider area which
could lead to increased sales and ultimately greater profits
• advertising and marketing benefits to a larger consumer market.
(c) The disadvantages of offering a web site service:
• keeping the web site up-to-date
• the cost of maintaining the web site
• ensuring that the web site is user friendly with appropriate easy to navigate
links.
29.5X Benefits of investing in a computerised accounting system would include:
• quick and easy to install
• capital outlays reasonable since packages are now much cheaper
• less time to carry out book-keeping/accounting transactions
• easier/less onerous work
• more financial information available for management
• greater accuracy
• can process documents, e.g. invoices, credit notes, statements, payslips etc
Adverse effects:
• cost and disruption on installation
• training
• reluctance to change by staff
• security issues
• health risks
• problems if the system goes down.
29.6 Other business uses for a computerised accounting system would be:
• Payroll
• Book-keeping
• Budgeting
• Preparation of financial statements
• Cash management.
Chapter 1: Introduction to accounting principles
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 profit is made they keep all the profits
• Able to offer personal service to customers
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)
(b)
(c)
(d)
1.8
Materiality
Business entity
Money measurement
Prudence
Employees would be interested in their employer’s financial results for the
following reasons:
• The ability to pay wages and salaries
• Secure employment with the opportunity to progress within the business
• Continued profitability
• Sound cash flow position
• Sales maintained and increasing
• Business viable for the forthcoming period
• Healthy customer base
Chapter 1: Introduction to accounting principles
(Any one from the above would be acceptable as an answer)
(Any three of the above would be acceptable as an answer)
1
Answers
Chapter 2: Double entry for cash transactions
2.1
(a)
(b)
(c)
(d)
(e)
(f)
Purchases
Office equipment
Bank loan
Cash in hand
Motor vehicle
Loan from financial company
2.2X Wrong:
Chapter 2: Double entry for cash transactions
2.3
Assets
Money owing to bank
Account to be Debited
asset
asset
liability
asset
asset
liability
Liabilities
Motor van
Stock of goods
Account to be Credited
(a) Cash
Capital
(b) Bank
Cash
(c) Purchases
Cash
(d) Office Machinery
Bank
(e) Stationery
Cash
2.4X Account to be debited
(a) Bank
(b) Purchases
(c) Motor car
(d) Cash
(e) Motor expenses
(f) Computer equipment
2.5
-
Account to be credited
Capital
Cash
Bank
Uncle Joe loan
Cash
Cash
Max Morgan
Bank Account
Jan-01
Jan-15
Capital
Sales
30,000
500
Jan-05
Jan-07
Jan-27
Jan-30
Purchases
S/H Van
Computer
Equipment
Purchases
2,770
4,800
2,100
1,090
Capital Account
Jan-01
Bank
30,000
Purchases Account
Jan-05
Jan-30
Bank
Bank
2,770
1,090
Jan-07
Bank
4,800
Van Account
Cash Account
Jan-09
Jan-29
2
Sales
Sales
680
325
Jan-10
Jan-22
Office Furniture
Motor Expenses
110
92
Sales Account
Jan-09
Jan-15
Jan-29
Cash
Bank
Cash
680
500
325
Office Furniture Account
Jan-10
Cash
110
Motor Expenses Account
Jan-22
Cash
Jan-27
Bank
92
Computer Equipment Account
2,100
2.6X
Jane Mellor
Cash Account
May 1
May 20
Capital
Sales
22,000
328
May 3
May 22
Bank
Stationery
20,000
72
Cash
22,000
Capital Account
May-01
Bank Account
Cash
Sales
20,000
560
May 7
May 10
Rent
Purchases
May 15
Display units
May 23
Purchases
May 31
S/H Van
500
1,700
400
400
3,000
Rent Account
May 7
Bank
May 10
May 23
Bank
Bank
500
Purchases Account
1,700
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
Chapter 2: Double entry for cash transactions
May 3
May 25
3,000
3
Answers
Chapter 3: Double entry for credit transactions
3.1
Account to be Debited
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
Office Furniture
Chapter 3: Double entry for credit transactions
3.2X Account to be debited
(a) Computer equipment
(b) Stationery
(c) Purchases
(d) Daswami & Co
(e) Purchases
(f) Sales returns
(g) Cash
(h) J. Leung
3.3
Account to be Credited
(a) Purchases
Account to be credited
J. Kershaw
Cash
J. Leung
Sales
Bank
Daswani & Co
Sales
Purchase Returns
Kendrick Products
Cash Account
Jan-01
Capital
20,000
Jan-05
Jan-24
Bank
Stationery
18,000
45
Cash
20,000
Capital Account
Jan-01
Purchases Account
Jan-02
Jan-07
Jan-09
T. Peters
J. Leigh
Bank
2,543
349
592
Jan-18
Purchase Returns
Jan-26
Bank
2,383
Jan-05
Cash
18,000
T. Peters Account
160
Jan-02
Purchases
2,543
Purchases
T. Peters
592
2,383
Purchases
349
P. Lamond
D. Gurkan
210
1,008
Bank Account
Jan-09
Jan-26
J. Leighs Account
Jan-07
Sales Account
Jan-16
Jan-26
P. Lamond Acccount
Jan-16
Sales
210
Jan-30
Sales Returns
60
Purchase Returns Account
Jan-18
4
T. Peters
160
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
Apr 14
Apr 28
Purchases
C. Chang
2,300
950
Apr 30
Ash Car Sales
5,400
3.4X Mark & Co
Bank Account
Apr 1
Capital
40,000
Capital Account
Apr 01
Bank
40,000
Purchases Account
E. Shah
C. Chang
Bank
Apr 20
E. Shah
845
950
2,300
920
E. Shah Account
Apr 16
Purchase returns
72
Apr 03
Purchases
845
Apr 20
Purchases
920
Purchases
950
C. Chang Account
Apr 28
Bank
950
Apr 05
Motor Van Account
Apr 09
Ash Car Sales
Apr 30
Bank
10,400
Ash Car Sales Account
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
Motor Expenses
40
Chapter 3: Double entry for credit transactions
Apr 3
Apr 5
Apr 14
Cash Account
Apr 23
Sales
Apr 29
Sales
369
Apr 26
Curtis & Co Account
420
Motor Expenses Account
Apr 26
Cash
40
5
Answers
Chapter 4: Balancing of accounts and
preparation of a Trial Balance
4.1
Capital
May-01
Bank
2,500
K Gibson
D Ellis
C Mendez
Balance c/d
76
370
87
2,367
2,900
Rent
Stationery
Rent
Balance c/d
120
60
120
200
500
Balance c/d
240
Bank
Chapter 4: Balancing of accounts and preparation of a Trial Balance
May-01
May-09
May-10
Capital
C Bailey
H Spencer
2,500
250
150
May-12
May-12
May-31
May-31
2,900
Jun-01
Balance b/d
2,367
Cash
May-06
Sales
500
Jun-01
Balance b/d
200
May-08
May-19
Cash
Cash
120
120
240
Jun-01
Balance b/d
240
May-08
May-15
May-19
May-31
500
Rent
May-31
240
Stationery
May-15
Cash
60
Purchases
May-02
May-02
May-02
May-18
May-18
D Ellis
C Mendez
K Gibson
D Ellis
C Mendez
540
87
76
145
234
1,082
Jun-01
Balance b/d
1,082
May-31
Balance c/d
1,496
May-31
Balance c/d
1,082
Sales
May-04
May-04
May-04
May-06
May-25
May-25
May-25
C Bailey
B Hughes
H Spencer
Cash
C Bailey
B Hughes
H Spencer
430
62
176
500
90
110
128
1,496
Jun-01
Balance b/d
1,496
1,496
6
1,082
H Spencer
May-04
May-25
Sales
Sales
176
128
304
Jun-01
Balance b/d
154
May-12
May-31
Bank
Balance c/d
370
315
685
May-10
May-31
Bank
Balance c/d
150
154
304
May-02
May-18
Purchases
Purchases
540
145
685
Jun-01
Balance b/d
315
May-02
May-18
Purchases
C Mendez
Jun-01
Balance b/d
87
234
234
234
D Ellis
May-31
May-31
Bank
Balance c/d
87
234
234
K Gibson
May-12
Bank
76
May-02
Purchases
76
C Bailey
May-04
May-25
Sales
Sales
430
90
520
Jun-01
Balance b/d
270
May-09
May-31
Bank
Balance c/d
250
270
520
Balance c/d
172
B Hughes
May-04
May-25
Jun-01
Sales
Sales
Balance b/d
62
110
172
May-31
172
172
Trial Balance as at 31 May 2010
Dr
Cr
£
Capital
Bank
Cash
Rent
Stationery
Purchases
Sales
H Spencer
D Ellis
C Mendez
C Bailey
B Hughes
£
2,500
2,367
200
240
60
1,082
1,496
154
315
234
270
172
4,545
Chapter 4: Balancing of accounts and preparation of a Trial Balance
C Mendez
4,545
7
4.2X (a)
Bank Account
August 1
August 14
August 20
Capital
Sales
Sales
August 28
Sales
22,000
980
1,300
August 1
August 7
August 7
Rent
Shop fittings
Purchases
1,800
3,230
5,000
2,000
August 9
Cash
1,000
August 30
Salaries
2,100
August 30
Balance c/d
26,280
Sept 1
Balance b/d
13,150
26,280
13,150
4.2X
Chapter 4: Balancing of accounts and preparation of a Trial Balance
Cash Account
August 9
Bank
1,000
Sept 1
Balance b/d
1,000
809
August 9
August 16
August 30
Stationery
Sundry expenses
Balance c/d
163
28
809
1,000
August 1
August 20
August 28
Bank
Bank
Bank
980
1,300
2,000
4,280
Sept 1
Balance b/d
4,280
Balance c/d
10,700
Sales Account
August 30
Balance c/d
4,280
4,280
Purchases Account
August 7
August 10
August 25
Bank
Book supplies
Delta Books
5,000
4,200
1,500
10,700
September 1
balance b/d
10,700
August 7
Bank
August 30
10,700
Shop Fittings Account
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
Purchases
1,500
Delta Books Account
August 25
8
4.2X (b)
Jenny Moore
Trial Balance as at 31 August 2010
Cr
£
13,150
809
Bank
Cash
Sales
Purchases
Shop Fittings
Capital
Rent
Stationery
Sundry expenses
Salaries
Book Supplies
Delta Books
10,700
3,230
1,800
163
28
2,100
31,980
£
4,280
22,000
4,200
1,500
31,980
4.3
Bank
(1)
(30)
(30)
Capital
L Clark
K Allen
(1)
Balance b/d
15,000
440
76
(9)
(11)
(27)
(27)
(27)
(28)
(30)
(30)
Rent
Rates
Bowman Furnishers
Howe Homes
W Hunt
Motor Vehicles
Bates Motors
Balance c/d
15,516
500
190
532
460
2,070
3,000
5,000
3,764
15,516
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
(3)
(20)
Purchases
Purchases
620
220
840
(1)
Balance b/d
780
Balance c/d
500
Sales returns
Bank
40
440
480
J Bond
(17)
(30)
Purchases returns
Balance c/d
60
780
840
Chapter 4: Balancing of accounts and preparation of a Trial Balance
Dr
Rent
(9)
Bank
500
(1)
Balance b/d
500
(12)
Sales
480
(30)
L Clark
480
(23)
(30)
9
R Gee
(12)
Sales
1,170
(1)
Balance b/d
1,170
(30)
Balance c/d
1,170
Purchses Returns
(30)
Balance c/d
88
88
(17)
(17)
Bowman Furnishers
J Bond
28
60
88
(1)
Balance b/d
88
Balance c/d
8,000
Motor Vehicles
(25)
(28)
Bates Motors
Bank
5,000
3,000
8,000
(30)
Balance b/d
8,000
(30)
8,000
Chapter 4: Balancing of accounts and preparation of a Trial Balance
Stationery
(29)
Cash
(30)
Balance b/d
56
(30)
Balance c/d
56
Balance c/d
3,930
56
Purchases
(3)
(3)
(3)
(3)
(20)
(20)
(20)
Bowman Furnishers
Howe Homes
W Hunt
J Bond
J Bond
W Hunt
Bowman
(1)
Balance b/d
(17)
(27)
Purchases returns
Bank
320
460
1,800
620
220
270
240
3,930
(30)
3,930
3,930
Bowman Furnishers
28
532
560
(3)
(20)
Purchases
Purchases
320
240
560
Purchases
Purchases
1,800
270
2,070
(7)
(12)
(12)
(12)
(26)
Cash
L Clark
K Allen
R Gee
Cash
(1)
Balance b/d
480
480
96
1,170
175
2,401
2,401
Balance c/d
190
W Hunt
(27)
Bank
2,070
(3)
(20)
2,070
Sales
(30)
Balance c/d
2,401
2,401
Rates
10
(11)
Bank
190
(1)
Balance b/d
190
(30)
K Allen
(12)
Sales
96
(23)
(30)
Sales returns
Bank
20
76
96
Balance c/d
400
Balance c/d
60
96
Wages
(14)
Cash
400
(1)
Balance b/d
400
(23)
(23)
K Allen
L Clark
(30)
Balance b/d
(30)
Bank
5,000
(7)
(26)
Sales
Sales
480
175
(1)
Balance b/d
(30)
Sales Returns
20
40
60
(30)
60
60
Bates Motors
Motor vehicles
5,000
Cash
(14)
(29)
(30)
Wages
Stationery
Balance c/d
655
199
Trial Balance as at 30 April 2010
Dr
£
3,764
3,930
Bank
Purchases
Capital
J Bond
Sales
Rent
Rates
R Gee
Wages
Purchases returns
Sales returns
Motor vehicles
Stationery
Cash
Cr
£
15,000
780
2,401
500
190
1,170
400
88
60
8,000
56
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
400
56
199
655
Chapter 4: Balancing of accounts and preparation of a Trial Balance
(25)
11
(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
Chapter 4: Balancing of accounts and preparation of a Trial Balance
£
12
Capital
Drawings
General expenses
Sales
Purchases
Debtors
Creditors
Bank
Cash
Plant and equipment
Heating and lighting
Rent
7,000
500
29,000
6,800
15,100
200
5,000
1,500
2,400
67,500
4.6
£
20,000
38,500
9,000
67,500
Trial Balance of S Higton as at 30 June 2010
Dr
Cr
£
Capital
Sales
Stationery
General expenses
Motor expenses
Cash at the bank
Stock 1 July 2009
Wages and salaries
Rent and rates
Office equipment
Purchases
Heating and lighting
Rent received
Debtors
Drawings
Creditors
Motor vehicle
Interest received
Insurance
1,200
2,745
4,476
1,950
7,668
9,492
10,500
6,000
81,753
2,208
10,353
4,200
7,500
3,444
153,489
£
19,956
119,439
2,139
10,230
1,725
153,489
Trial Balance of Ms Anita Hall as at 31 December 2010
Dr
Plant and machinery
Motor vehicles
Premises
Wages
Purchases
Sales
Rent received
Telephone, printing and stationery
Creditors
Debtors
Bank overdraft
Capital
Drawings
General Expenses
Lighting and heating
Motor expenses
Motor vehicle
£
21,450
26,000
80,000
42,840
119,856
(b) Error of commission
(c) Error of omission
(d) Error of original entry
(e) Complete reversal of entries
(f) Error of principle
£
179,744
3,360
3,600
27,200
30,440
2,216
131,250
10,680
3,584
2,960
2,360
343,770
4.8X (a) Error of principle
Cr
343,770
Chapter 4: Balancing of accounts and preparation of a Trial Balance
4.7X
13
Answers
Chapter 5: Value Added Tax
5.1
(a)
C Black
Curzon Road
Stockport
To: J Booth
89 Andrew Lane
Stockport
INVOICE No 947T
Date: 1 March 2011
Your Order No. 1697
£
20,000 coils sealing tape x £4.70 per 1,000
94.00
40,000 sheets A5 paper x £4.50 per 1,000
180.00
30,000 sheets A4 paper x £4.20 per 1,000
126.00
400.00
70.00
470.00
VAT at 17.5%
VAT Reg No. 542 4483 95
(b)
J Booth's Books
C Black
2011
01-Mar
Purchases
C Black's Books
J Booth
Chapter 5: Value Added Tax
2011
01-Mar
14
Sales
470
5.2X (a) & (b) & (c)
2010
Name of Customer
Jan 2
Jan 6
Jan 7
D Woolham & Co
C Crawford
S Brocklehurst
Jan 9
Jan 13
Jan 18
Jan 21
Jan 24
Jan 29
Jan 31
L Price & Partners
D Woolham & Co
L Price & Partners
C Crawford
C Crawford
S Brocklehurst
L Price & Partners
Net
VAT
Total
£
230.00
348.00
1,980.00
£
40.25
60.90
346.50
£
270.25
408.90
2,326.50
520.00
56.00
200.00
340.00
44.00
846.00
722.00
5,286.00
91.00
9.80
35.00
59.50
7.70
148.05
126.35
925.05
611.00
65.80
235.00
399.50
51.70
994.05
848.35
6,211.05
470
5.3
(a) Cost of 22 reams of paper at £3.75
Input VAT is 17.5%
Customer Charged
Amount before VAT is added,
100
£235 ______
117.5
Therefore, output VAT is
Amount of VAT due to HMRC, £35.00 £14.44
(b) Net Amount
£40.00
£ 2.00
£53.28
£ 3.20
VAT
£7.00
£0.35
£9.32
£0.56
£82.50
£14.44
£96.94
£235.00 including VAT
£200.00
17.5
£82.50 ____
100
£35.00
£20.56
Total
£47.00
£ 2.35
£62.60
£ 3.76
5.4
(a) Ivy & Co
VAT Account
Dr
2010
Apr-30
May-31
Jun-30
Jun-30
Purchases Day Book
Purchases Day Book
Purchases Day Book
Balances c/d
8,750
7,350
9,625
2,380
28,105
Cr
2010
Apr-30
May-31
Jun-30
Sales Day Book
Sales Day Book
Sales Day Book
Jul-01
Balance b/d
9,205
8,400
10,500
28,105
2,380
When Ivy & Co pays this amount to HMRC this will clear the amount in the VAT
account.
5.5X
VAT Account
Dr
2010
Oct 31
Nov 30
Dec 31
Dec 31
Purchases Day Book
Purchases Day Book
Purchases Day Book
Balances c/d
6,580
6,895
9,100
13,300
35,875
2010
Oct 31
Nov 30
Dec 31
Cr
Sales Day Book
Sales Day Book
Sales Day Book
13,125
10,850
11,900
35,875
Jan 01
Balance b/d
Chapter 5: Value Added Tax
(b) The outstanding balance of £2,380 is the amount of VAT due to HMRC for the
quarter ending 30th June 2010.
13,300
(b) All business records must be kept for 6 years.
15
Answers
Chapter 6: Business documentation
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
Chapter 6: Business documentation
£
16
May 1
May 2
May 8
May 17
May 23
May 28
Balance b/forward
Invoice No. 7821
Invoice No. 7955
Credit Note No. 304
Invoice No. 8204
Cheque
£
43.75
35.00
10.20
74.50
51.50
Balance
£
101.50
145.25
180.25
170.05
244.55
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.
Answers
Chapter 7: Capital and revenue expenditure
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 fixed assets
7.2
Used up in the short term
Capital
(a)
(b)
(c)
(d)
(e)
New stationery and brochures
New pickup truck
New lathe
Delivery costs
Electricity
(f) Wages
- lathe
- wiring
- electricity costs
- Re: Improvements
- Other
£
18,000
5,200
200
1,800
20,000
-
Revenue
£
411
2,100
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
Cairns Engineering Co
17
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)
Chapter 7: Capital and revenue expenditure
18
Revenue (b), (d), (e), (g)
Answers
8.1
(a)
(b)
(c)
(d)
(e)
(f)
Sales day book / sales ledger / personal account
Cash book / general ledger / nominal account
Purchases day book / purchases ledger / personal account
Cash book / general ledger / nominal account
Sales returns day book / sales ledger / personal account
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
Date
2010
Nov-02
Nov-03
Nov-09
Nov-11
Nov-13
Nov-18
Nov-23
Nov-30
Details
T Bates
D Cope
F Chan
T Bates
B Ho
D Cope
M Saka & Sons
F Chan
Sales Day Book
Folio
Goods
£
186.00
166.00
12.00
54.00
66.00
32.00
20.00
320.00
856.00
VAT
£
32.55
29.05
2.10
9.45
11.55
5.60
3.50
56.00
149.80
Total
£
218.55
195.05
14.10
63.45
77.55
37.60
23.50
376.00
1005.80
Chapter 8: Books of original entry and ledgers – Sales day book and sales ledger including VAT
Chapter 8: Books of original entry and ledgers – Sales day
book and sales ledger including VAT
19
Sales Ledger
Chapter 8: Books of original entry and ledgers – Sales day book and sales ledger including VAT
20
Cr
T Bates Account
Dr
Nov-02
Nov-11
Dr
Nov-03
Nov-18
Dr
Nov-09
Nov-30
Dr
Nov-13
Dr
Nov-23
Sales
Sales
218.55
63.45
D Cope Account
195.05
37.60
F Chan Account
14.10
376.00
B Mo Account
77.55
M Saka & Sons Account
23.50
Sales
Sales
Sales
Sales
Sales
Sales
Cr
Cr
Cr
Cr
General Ledger
Dr
Dr
8.4X
Date
2011
Jul 1
Jul 5
Jul 8
Jul 14
Jul 19
Jul 26
Jul 28
Jul 31
Details
Sales Account
Nov-30
Credit sales for the month
Cr
856.00
VAT Account
Nov-30
Sales day book: VAT
149.80
Cr
Sales Day Book
Folio
Goods
Hall Products
Ash & Co
K. Meakin
A. Ballearic
Hall Products
G. Huang
A. Ballearic
J. Stead
520.00
62.00
18.00
110.00
880.00
126.00
42.00
98.00
1,856.00
VAT
91.00
10.85
3.15
19.25
154.00
22.05
7.35
17.15
324.80
Total
611.00
72.85
21.15
129.25
1,034.00
148.05
49.35
115.15
2,180.80
Sales Ledger
Hall Products Account
Dr
Jul 1
Jul 19
Dr
Jul 5
Dr
Jul 8
Dr
Jul 14
Jul 28
Sales
Sales
Sales
Sales
Sales
Sales
611.00
1,034.00
Ash & Co Account
72.85
K. Meakin Account
21.15
A. Ballearic Account
129.25
49.35
Cr
Cr
Cr
Cr
Dr
Jul 26
Dr
Jul 31
Sales
Sales
G. Huang Account
148.05
J Stead Account
115.15
Cr
Cr
Sales Account
Jul 31 Credit sales for the month
Dr
VAT Account
Jul 31 Sales day book : VAT
8.5
Cr
1,856.00
Cr
324.80
It is important to check sales invoices prior to sending them out to customers for
the following reasons:
• To ensure the customer’s 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.
Chapter 8: Books of original entry and ledgers – Sales day book and sales ledger including VAT
General Ledger
Dr
21
Answers
Chapter 9: Purchases day book and
purchase ledger including VAT
9.1
White Bros
Chapter 9: Purchases day book and purchase ledger including VAT
Purchases Day Book
Date
2010
May-01
May-07
May-16
May-23
May-26
May-28
May-31
Details
Bould & Co
Harlow & Brown
J Adams Ltd
Bould & Co
J H Products
Harlow & Brown
P Yeung Ltd
VAT
£
18.20
8.40
40.95
29.75
56.00
10.85
78.05
Total
£
122.20
56.40
274.95
199.75
376.00
72.85
524.05
1384.00
242.20
1626.20
Purchase Ledger
Dr
Bould & Co Account
May-01
May-23
Dr
Cr
Purchases
Purchases
Harlow and Brown Account
May-07
May-28
Dr
May-16
Dr
Purchases
Purchases
56.40
72.85
Purchases
274.95
Cr
J H Products Account
May-26
Dr
Cr
Purchases
376.00
Purchases
524.05
P Yeung Account
May-31
122.20
199.75
Cr
J Adam Ltd Account
Cr
General Ledger
Dr
May-31
Purchases Account
Credit purchases
for the month
Dr
May-31
22
Goods
£
104.00
48.00
234.00
170.00
320.00
62.00
446.00
1384.00
VAT Account
Purchases Day
Book : VAT
Cr
242.20
Cr
9.2
Bakers Electrical Co
Purchases Day Book
Date
2010
Jul-03
Jul-08
Jul-12
Jul-17
Jul-21
Jul-23
Jul-25
Jul-30
Details
Peak Electrical
Leigh Electrics
Thomas Motors
Naik & Sons
Peak Electrical
W D Services
Leighs Electrics
Naik & Sons
Goods
£
722.00
84.00
274.00
160.00
158.00
46.00
210.00
178.00
VAT
£
126.35
14.70
47.95
28.00
27.65
8.05
36.75
31.15
Total
£
848.35
98.70
321.95
188.00
185.65
54.05
246.75
209.15
1832.00
320.60
2152.60
Dr
Peak Electrical Ltd Account
Jul-03
Jul-21
Dr
Cr
Purchases
Purchases
Leigh Electrics Account
Jul-08
Jul-25
Dr
Cr
Purchases
Purchases
98.70
246.75
Purchases
321.95
Thomas Motors Account
Jul-12
Dr
Cr
Naik & Sons Account
Jul-17
Jul-30
Dr
Cr
Purchases
Purchases
188.00
209.15
Purchases
54.05
W D Services Account
Jul-23
848.35
185.65
Cr
General Ledger
Dr
Jul-31
Purchases Account
Credit purchases
for the month
Dr
Jul-31
1832.00
VAT Account
Purchases Day
Book : VAT
Cr
320.60
Cr
Chapter 9: Purchases day book and purchase ledger including VAT
Purchases Ledger
23
9.3X Tasty Foods
Purchases Day Book
Date
2010
Aug 1
Aug 6
Aug 10
Aug 14
Aug 22
Aug 27
Aug 29
Aug 30
Details
Goods
£
62.00
48.00
224.00
136.00
98.00
166.00
84.00
366.00
1,184.00
Barker Foods Ltd
Fern Bros
Ash Catering Co
Barker Foods Ltd
Farm Produce
Fern Bros
Leigh & Sons
Ash Catering Co
VAT
£
10.85
8.40
39.20
23.80
17.15
29.05
14.70
64.05
207.20
Total
£
72.85
56.40
263.20
159.80
115.15
195.05
98.70
430.05
1,391.20
Chapter 9: Purchases day book and purchase ledger including VAT
Purchases Ledger
24
Dr
Barker Foods Ltd Account
Aug 1
Aug 14
Dr
Cr
Purchases
Purchases
72.85
159.80
Purchases
Purchases
56.40
195.05
Fern Bros Account
Aug 6
Aug 27
Dr
Cr
Ash Catering Co Account
Cr
Aug 10
Purchases
263.20
Aug 30
Purchases
430.05
Dr
Farm Products Account
Dr
Leigh & Sons Account
Aug 22
Aug 29
Cr
Purchases
115.15
Cr
Purchases
98.70
General Ledger
Dr
Aug 31
Purchases Account
Credit purchases
for the month
Dr
Aug 31
VAT Account
Purchases Day
Book : VAT
Cr
1,184.00
207.20
9.4X It is important to check invoices prior to payment to ensure:
• The goods invoices match the order specification
• The goods have been received
• They have been charged correctly
• The calculations are accurate
• The invoice has been passed for payment
Cr
Answers
Chapter 10: Sales returns day book and purchase
returns day book
10.1
Date
2010
Jun-01
Jun-01
Jun-09
Jun-09
Jun-23
Jun-30
Goods
£
180.00
60.00
140.00
330.00
780.00
440.00
1930.00
Details
J Alcock
P Twigg
Bell Products
Travis Ltd
B Seddon
P Twigg
(Page 7)
VAT
£
31.50
10.50
24.50
57.75
136.50
77.00
337.75
Total
£
211.50
70.50
164.50
387.75
916.50
517.00
2267.75
VAT
£
2.10
8.75
10.85
Total
£
14.10
58.75
72.85
Sales Returns Day Book
Date
2010
Jun-12
Jun-28
Details
Goods
£
12.00
50.00
62.00
J Alcock
Travis Ltd
Sales Ledger
Dr
Jun-01
J Alcock Account
Sales
Dr
Jun-01
Jun-30
Sales
70.50
517.00
Cr
164.50
387.75
Jun-28
Cr
Sales returns
B Seddon Account
Sales
14.10
Cr
Travis Ltd Account
Sales
Dr
Jun-23
Sales returns
Bell Products Account
Dr
Jun-09
Jun-12
P Twigg Account
Sales
Sales
Dr
Jun-09
211.50
Cr
58.75
Cr
916.50
Chapter 10: Sales returns day book and purchase returns day book
Sales Day Book
General Ledger
Dr
Sales Account
Jun-30
Dr
Jun-30
Sales Returns Account
Total SRDB
Dr
Jun-30
Cr
Total SDB
Cr
62.00
VAT Account
Total SRDB
1930.00
10.85
Jun-30
Cr
Total SDB
337.75
25
10.2
Purchases Day Book
Chapter 10: Sales returns day book and purchase returns day book
Date
2010
May-01
May-05
May-05
May-14
May-19
May-19
May-19
May-31
May-31
Details
Goods
£
120.00
80.00
220.00
60.00
300.00
280.00
80.00
56.00
172.00
1368.00
J Yau Ltd
S Wager
Ash Bros
J Yau Ltd
D Wong
Rughani & Co
Ash Bros
A Davies
Rughani & Co
VAT
£
21.00
14.00
38.50
10.50
52.50
49.00
14.00
9.80
30.10
239.40
Total
£
141.00
94.00
258.50
70.50
352.50
329.00
94.00
65.80
202.10
1607.40
VAT
£
5.25
7.35
12.60
Total
£
35.25
49.35
84.60
Purchase Returns Day Book
Date
2010
May-09
May-27
Details
Goods
£
30.00
42.00
72.00
J Yau Ltd
D Wong
Purchase Ledger
Dr
May-09
J Yau Ltd Account
Purchase returns
Dr
35.25
May-01
May-14
Purchases
Purchases
S Wager Account
May-05
Dr
Dr
Purchases
94.00
Purchases
Purchases
258.50
94.00
Cr
D Wong Account
Purchase returns
Dr
49.35
May-19
Cr
Purchases
352.50
Purchases
Purchases
329.00
202.10
Purchases
65.80
Rughani & Co Account
May-19
May-31
Dr
Cr
A Davies Account
May-31
141.00
70.50
Cr
Ash Bros. Account
May-05
May-19
May-27
Cr
Cr
General Ledger
Dr
May-31
Purchases Account
Total PDB
Dr
Purchase Returns Account
May-31
Dr
May-31
26
Cr
1368.00
Cr
Total PRDB
72.00
Total PRDB
12.60
VAT Account
Total PDB
239.40
May-31
Cr
10.3X Anderson's Ltd (b)
Purchases Day Book
Date
2010
Jan 2
Jan 5
Jan 19
Details
Naylor's Ltd
Roberts & Sons
R. James & Co
Goods
VAT
Total
1,300.00
668.00
1,512.00
3,480.00
227.50
116.90
264.60
609.00
1,527.50
784.90
1,776.60
4,089.00
Purchase Returns Day Book
Date
2010
Jan 13
Jan 30
Details
Goods
VAT
Total
Naylor's Ltd
R. James & Co
84.00
400.00
484.00
14.70
70.00
84.70
98.70
470.00
568.70
Date
2010
Jan 12
Jan 26
Jan 26
Jan 28
Jan 28
Details
Goods
VAT
Total
Marlow (Fancy
Gifts)
J. Jeynes
Birch Bros
F & J Shah
Marlow (Fancy
Gifts)
656.00
114.80
770.80
2,468.00
340.00
5,000.00
380.00
431.90
59.50
875.00
66.50
2,899.90
399.50
5,875.00
446.50
8,844.00
1,547.70
10,391.70
Goods
VAT
Total
60.00
10.50
70.50
60.00
10.50
70.50
Sales Returns Day Book
Date
2010
Details
Marlow (Fancy
Gifts)
Jan 30
10.3X (a) (c) (e)
Sales Ledger
J. Jeynes Account
Jan-01
Jan-26
Feb-01
Balance b/d
Sales
Balance b/d
1,490.00
2,899.90
4,389.90
Jan-31
Balance c/d
4,389.90
4,389.90
4,389.90
Marlow (Fancy Goods) Account
Jan-01
Jan-12
Jan-28
Balance b/d
Sales
Sales
552.00
770.80
446.50
1,769.30
Feb-01
Balance b/d
1,698.80
Jan-01
Jan-28
Balance b/d
Sales
780.00
5,875.00
6,655.00
Feb-01
Balance b/d
6,655.00
Jan-26
Sales
Jan-30
Jan-31
Sales Returns
Balance c/d
70.50
1,698.80
1,769.30
Chapter 10: Sales returns day book and purchase returns day book
Sales Day Book
F & J Shah Account
Jan-31
Balance c/d
6,655.00
6,655.00
Birch Bros Ltd Account
399.50
27
10.3X (a) (c) (e)
Purchase Ledger
R. James & Co. Account
Jan-30
Jan-31
Purchase Returns
Balance c/d
470.00
2,906.60
3,376.60
Jan-01
Jan-19
Balance b/d
Purchases
1,600.00
1,776.60
3,376.60
Feb-01
Balance b/d
2,906.60
Jan-01
Jan-02
Balance b/d
Purchases
900.00
1,527.50
2,427.50
Feb-01
Balance b/d
2,328.80
Jan-01
Jan-05
Balance b/d
Purchases
490.00
784.90
1,274.90
Feb-01
Balance b/d
1,274.90
Naylor's Ltd Account
Jan-13
Jan-31
Purchase Returns
Balance c/d
98.70
2,328.80
2,427.50
Roberts & Sons Account
Chapter 10: Sales returns day book and purchase returns day book
Jan-31
28
Balance c/d
1,274.90
1,274.90
10.3X (d)
General Ledger
Dr
Cr
Sales Account
Jan-31
Dr
Total Sales for
January
Cr
Sales Returns Account
Jan-31
Total SRDB
Jan-31
Total Purchases
for January
8,844.00
60.00
Purchases Account
3,480.00
Purchases Return Account
Jan-31
Dr
Jan-31
Jan-31
Jan-31
Total PRDB
484.00
Jan-31
Jan-31
Total PRDB
Total SDB
84.70
1,547.70
*Feb-01
Balance b/d
1,632.40
1,012.90
Cr
VAT Account
Total PDB
Total SRDB
Balance c/d
609.00
10.50
1,012.90
1,632.40
* 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
Add Purchases not received by us
Add Returns not received by supplier
Balance per Supplier's Statement
1,387.68
68.42
54.62
1,510.72
Answers
Chapter 11: Cash books
11.1
Cash Book
Cash
(1)
(4)
(6)
(8)
(10)
(14)
(15)
(30)
(31)
(1)
Capital
Sales
T Thomas
Sales
J King
J Walters
(Loan)
Bank
J Scott
Sales
Balances b/d
Bank
4,000
Cash
(2)
(4)
(12)
(15)
(20)
Fixtures
Rent
Wages
Cash
Stationery
500
(22)
J French
277
(28)
(31)
Drawings
Balances c/d
225
188
308
300
200
66
791
5,273
216
4,247
Bank
660
140
275
200
60
166
100
216
4,247
791
5,273
11.2X
Dr
Cash Book
Cash
Bank
76.32
2010
Cash
Bank
Feb 1
Balance b/d
2,376.50
Feb 2
Electricity
Feb 6
D Hill
300.00
Feb 4
Motor
expenses
15.00
156.00
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
Feb 14
500.00
Feb 16
217.00
53.00
Feb 17
Feb 17
Wright
Brothers
Drawings
Post office re:
86.20
Feb 22
Feb 26
D Whitman loan
J Smith
Sales
Feb 28
Balance c/d
590.60
57.10
50.00
Telephone a/c
140.60
Mr S Jepson
133.42
Mar-01
Balances b/d
43.72
Feb 23
Petrol
Feb 27
Brownsons of
M/cr
Feb 28
Salaries
Feb 28
Balance c/d
4,405.30
21.00
899.00
2,400.00
43.72
133.42
Mar-01
Balances b/d
Chapter 11: Cash books
2010
Cr
4,405.30
590.60
29
11.3
Cash Book
Disct
(1)
(3)
(5)
(9)
Capital
Sales
N Morgan
S Cooper
(14)
(20)
(31)
L Curtis
P Exeter
Sales
Cash
Bank
6,000
407
10
20
210
380
2
32
407
115
78
88
6,871
Disct
(1)
(2)
(4)
(7)
(12)
(16)
(31)
Fixtures
Purchases
Rent
S Thompson
& Co
Rates
M Monroe
Calances c/d
Cash
Bank
950
1,240
200
4
76
410
6
10
114
93
407
4,195
6,871
General Ledger
Discounts Allowed
(31)
Cash Book
32
Discounts Received
(31)
Cash Book
10
11.4X
M Pinero
Cash Book
Dr
Chapter 11: Cash books
Disct
(1)
(2)
Balance b/d
Capital
(4)
(5)
(8)
(15)
(18)
Sales
Cash
Sales
Bank
L Graham
(18)
(18)
(22)
(28)
(30)
B Crenshaw
H Green
T Weiskopf
Cash
Balance c/d
Cash
58
Bank
1,000
220
200
500
400
4
76
7
11
133
209
204
755
6,049
22
1,382
Disct
(1)
(3)
(5)
(6)
(6)
(6)
(12)
(15)
(16)
(20)
(26)
(28)
(31)
(31)
8,422
Dr
Cash Book
Discounts Allowed Account
Cash Book
22
Cash
Bank
1,470
780
200
2
6
10
78
234
390
77
400
120
210
150
755
4,920
18
(31)
30
Balance b/d
Office
fixtures
Bank
B Barnes
T Horton
T Jackin
Motor
Expenses
Cash
Drawings
Wages
Insurance
Bank
Motor Van
Balance c/d
General Ledger
Discounts Received Account
Dr
(31)
Cr
20
1,382
8,422
Cr
18
Cr
Answers
Chapter 12: Petty cash and the imprest system
12.1
£
Date
Details
2.00
Total
£
Jun 01
Jun 01
Jun 01
Jun 03
Jun 04
Jun 06
Jun 10
Jun 14
Jun 16
Jun 19
Jun 21
Jun 23
Jun 27
Jun 29
Balance b/d
Cash
Window cleaner
Postage stamps
Petrol
Stationery
Jean Ford stamps
Office cleaner
Parcel postage
Magazine
Computer disks
Petrol
Refreshments
Office cleaner
p
10.00
7.60
37.60
9.75
32
33
34
35
8
36
37
38
39
40
41
42
20.00
1.35
3.00
7.95
14.10
4.20
20.00
135.55
Jun 30
Balance c/d
Jul 01
Balance b/d
Jul 01
Cash
152.00
16.45
133.55
VAT
Postage
Cleaning
Number
p
2010
18.52
131.48
Voucher
16.45
152.00
Amount required to restore imprest = Float required
£
150.00
Less Cash in hand 16.45
Amount required 133.55
£
p
£
p
£
p
Motor
Expenses
£ p
Stationery
£
p
Sundry
Expenses
£ p
10.00
7.60
5.60
1.45
32.00
8.30
20.00
1.35
3.00
1.05
2.10
6.90
12.00
4.20
20.00
10.20
8.95
50.00
44.00
15.20
7.20
Chapter 12: Petty cash and the imprest system
Receipts
31
Singh's Estate Agents - Petty Cash book
12.2X
Receipts
Date
Voucher
Details
Total
VAT
Postage
Cleaning
£
£
£
£
11.66
7.40
8.60
20.00
4.23
1.66
£
23.40
76.60
3.50
2010
15 Oct
15 Oct
16 Oct
17 Oct
18 Oct
20 Oct
20 Oct
23 Oct
23 Oct
25 Oct
27 Oct
28 Oct
Balance
Cash
Envelopes and files
Tea, Coffee and milk
Special delivery
Office cleaner
Cleaning materials
M Lloyd Stationery
Postage stamps
Travel expenses
Flowers
Photocopy paper
80
81
82
83
84
78
85
86
87
88
Chapter 12: Petty cash and the imprest system
£
Sundry
Expenses
£
31 Oct Balance
c/d
01 Nov Balance
b/d
7.40
7.00
89.70
4.43
01 Nov Cash
Less Cash in hand
13.80
Amount required
86.20
20.00
3.60
0.63
0.74
1.40
13.80
103.50
10.00
8.60
7.00
16.42
4.99
9.40
Amount required to restore the imprest = Float required 100.00
32
Stationery
b/d
103.50
13.80
86.20
Travel
Expenses
£
16.42
4.25
8.00
15.60
23.60
16.42
18.00
11.65
Answers
Chapter 13: Bank reconciliation statements
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
Dec-31
(Totals so far)
J Walters
2,328
54
2010
Dec-31
Dec-31
(Totals so far)
Bank charges
Balance c/d
2,382
497
22
1,863
2,382
(b)
Less Bankings not yet on bank statement (249 1 178)
1,863
115
1,978
427
Balance per bank statement
1,551
OR
Bank Reconciliation Statement as at 31 December 2010
Balance per bank statement
Add Bankings not yer on bank statement (249 1 178)
Less Unpresented cheque
1,551
427
1,978
115
Balance per cash book
1,863
13.2X
(a)
Preston & Co
Cash Book
Dr
Dec 31
Dec 31
Balance b/d
BGC: P Todd
9,155
270
9,425
Jan 1
Balance b/d
Dec 31
Dec 31
Cr
Bank charges
Balance c/d
110
9,315
Chapter 13: Bank reconciliation statements
Bank Reconciliation Statement as at 31 December 2010
Balance per cash book
Add Unpresented cheque
9,425
9,315
33
(b)
Preston & Co
Bank Reconciliation Statement as at 31 December 2010
£
9,315
575
Balance as per cash book
Add Unpresented cheque
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
£
7,755
2,135
Balance as per bank statement
Add Bankings not yet on bank statement ( 945 1 300 1 890)
9,890
Less Unpresented cheque
575
Balance per cash book
9,315
13.3
(a)
Chapter 13: Bank reconciliation statements
Cash Book - James Baxter
2010
Mar-31
Mar-31
BGC - A May
Balance c/d
£
929
2,003
2010
Mar-31
Mar-31
Mar-31
£
2,804
100
Balance b/d
Standing order
- Oak plc
Bank charges
28
2,932
2,932
(b)
James Baxter
Bank Reconciliation Statement as at 31 March 2010
£
2,003
160
Bank overdraft per cash book
Add Banking not entered on bank statement
2,163
Less Unpresented cheque
490
Bank overdraft per bank statement
1,673
OR
James Baxter
Bank Reconciliation Statement as at 31 March 2010
34
Balance per bank statement
Less Banking not entered on bank statement
£
1,673
160
1,513
490
O/D
Add Unpresented cheque
Balance per cash book
2,003
O/D
O/D
13.4X
(a)
E Flynn
Cash Book
2010
Dec-06
Dec-20
Dec-31
Dec-31
Dec-31
J Hallworth
C Walters
P Miller
K Saunders
Balance c/d
155
189
211
180
4,007
2010
Dec-01
Dec-10
Dec-19
Dec-29
Dec-30
Dec-31
Balance b/d
P Wood
M Roberts
P Phillips
s/o Mercantile
Bank charges
3,872
206
315
84
200
65
4,742
4,742
(b)
E Flynn
Bank Reconciliation Statement as at 31 December 2010
Bank overdraft per cash book
Add Bank lodgements not yet entered on bank statement
4,007
211
4,218
Less Unpresented cheque
84
Bank overdraft per bank statement
4,134
(b) Date
Apr-01
Apr-07
Apr-13
Apr-20
Apr-30
Apr-22
Narrative
Balance b/d
Sales banked
Sales banked
Sales banked
Sales banked
CT - M Bell
£
8,000
800
550
650
750
1,230
Date
Apr-02
Apr-08
Apr-15
Apr-15
Apr-20
Apr-28
Apr-30
Apr-30
Narrative
F Bashir (10123)
M Tyler (10124)
H Joshi (10125)
DD / MTC
DD / Pre. Ins
Bank charges
Dishonoured cheque
Balance c/d
11,980
May-01
Balance b/d
Chapter 13: Bank reconciliation statements
13.5
(a) A cheque that the bank refuses to pay due to insufficent funds in the debtor's
account.
£
1,200
1,300
1,250
250
80
120
280
7,500
11,980
7,500
(c)
Real Kitchen Suppliers
Bank Reconciliation Statement as at 30 April 2010
Balance as per cash book
Add: Unpresented cheque - 10125
£
£
7,500
1,250
Less: cash not yet credited
8,750
750
Balance per bank statement
8,000
35
Answers
Chapter 14: The journal
14.1
The Journal
Date
2010
Jan-01
Jan-05
Jan-08
Jan-15
Jan-29
Details
Dr
£
4,000
Computer Equipment
Data Systems Ltd
Drawings
Purchases
Bad debts
J Oddy
Motor vehicle
Bank
Cr
£
4,000
120
120
220
220
15,500
15,500
Office furniture and fittings
250
J Street
250
14.2X
(a) Fixtures
(b) Drawings
Dr
Dr
1,809
500
(c) Drawings
Dr
(d) Office
equipment
Purchases
Cr
Cr
1,809
500
100
Cash
Cr
100
Dr
500
K Lamb
Cr
500
(e) J Harper
Dr
65
Fixtures
Cr
65
(f)
Dr
68
J Brown
Cr
68
Dr
2,190
Super Offices
Cr
2,190
(a) J Harkness
(b) Machinery
Dr
Dr
678
4,390
J Harker
L Pearson
Cr
Cr
678
4,390
(c) Motor Van
Dr
10,800
Motor expenses
Cr
10,800
Bad debts
Chapter 14: The journal
(g) Office
equipment
J Harper
14.3
(d) E Fletcher
Dr
9
(e) Sales
Dr
257
Dr
Dr
699
189
Sales
Cr
9
Commissions
received
Cr
257
K Webb
Bank
Cr
Cr
699
189
14.4X
(a) H Weld
(b) Cash
(c) B Maxim
Dr
443
(d) K Innes
Dr
10
(e) H Mersey*
Dr
178
B Gunn
Cr
443
Purchases
Cr
10
Cash
Cr
178
*Needs double the amount to first cancel out the error and then replace it with the
correct amount.
36
14.5X
(a)
Journal
Sep 30
Sep 30
Dr
750
Drawings
Purchases
Bring correction of error of omission
L Patel
A Patek
Cr
750
500
500
Being correction of your error of commission
(b)
Dr
Sep 30
Sep 30
Suspense Account
Balance b/d
Farmer & Co
340
170
510
Sep 30
Sep 30
Cr
Sales
Pointer Bros
240
270
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
Chapter 14: The journal
One from the above list.
37
Answers
Chapter 15: Sales ledger and purchase ledger
control accounts
15.1
Dr
Sales Ledger Control Account
2010
Oct-01
Oct-31
Balance b/d
SDB
Nov-01
Balance b/d
12,340
124,790
2010
Oct-31
Oct-31
Oct-31
Oct-31
SRDB
Bank & cash
Discount allowed
Balance c/d
Chapter 15: Sales ledger and purchase ledger control accounts
137,130
38
Cr
2,847
116,225
3,638
14,420
137,130
14,420
15.2X
Dr
2010
Feb 1
Feb 28
Feb 28
Sales Ledger Control Account
Balance b/d
SDB
Bank : dishonoured
cheques
33,950
347,480
791
2010
Feb 28
Feb 28
Feb 28
Feb 28
Feb 28
Feb 28
Bank & cash
Discount allowed
SRDB
Bad Debts
Purchase ledger
set offs
Balance c/d
382,221
Mar 1
Balance b/d
Cr
332,920
4,497
11,095
977
1,400
31,332
382,221
31,332
15.3
Dr
2010
Jul-31
Jul-31
Jul-31
Jul-31
Purchase Ledger Control Account
PRDB
Bank
Discount received
Balance c/d
1,575
26,150
550
19,375
47,650
2010
Jul-01
Jul-31
Balance b/d
PDB
Cr
19,450
28,200
47,650
Aug-01
Balance b/d
19,375
15.4X
Dr
2010
Jan 31
Jan 31
Jan 31
Jan 31
Jan 31
Purchase Ledger Control Account
PRDB
Bank
Discount received
Sales ledger set offs
Balance c/d
2,835
45,070
990
2,000
34,875
85,770
2010
Jan 31
Jan 31
Balance b/d
PDB
Cr
35,010
50,760
85,770
Feb 1
Balance b/d
34,875
15.5X
(a)
2009
Jan 1
Dec 31
Dec 31
Sales Ledger Control Account
Balance b/d
SDB
Returned cheque
65,000
453,900
750
2009
Dec 31
Dec 31
Dec 31
Dec 31
Dec 31
Dec 31
519,650
Cr
RIDB
Bank
Discount All
Bad Debts
Purchase ledger
set offs
Balance c/d
6,430
432,000
7,540
650
1,650
71,380
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.
Chapter 15: Sales ledger and purchase ledger control accounts
Dr
39
Answers
Chapter 16: Trading account and profit and
loss account of a sole trader
16.1
Lucy Chan
Trading and Profit and Loss Account for the year ending 31 December 2010
Chapter 16: Trading account and profit and loss account of a sole trader
£
40
Sales
Less cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent
Wages and salaries
Printing and stationery
Electricity expenses
General expenses
84,665
15,085
4,595
28,865
2,940
2,485
1,295
Net Profit
16.2X
£
133,770
69,580
64,190
40,180
24,010
Charles Drew
Trading and Profit and Loss Account for the year ending 31 December 2010
£
Sales
Less cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Wages
Rent
Office expenses
Motor expenses
Electricity expenses
Net Profit
96,547
18,495
11,229
5,330
1,620
922
1,350
£
128,452
78,052
50,400
20,451
29,949
G Singh
Trading and Profit and Loss Account for the year ended 31 December 2010
£
Sales
Less Cost of goods sold:
Purchases
Less Closing stock
Gross Profit
Less Expenses
Wages
Motor expenses
Rates
Insurance
General expenses
58,516
10,192
14,224
11,300
R Cairns
Trading and Profit and Loss Account for the year ended 30 June 2010
£
Sales
Less Cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Wages
Rates
Printing and Stationery
Electricity
Insurance
Sundry Expenses
Motor expenses
71,409
11,498
9,492
2,000
562
1,266
605
1,518
3,109
Net Profit
16.5X
48,324
25,524
8,600
2,080
2,680
444
420
Net Profit
16.4X
£
73,848
£
99,082
59,911
39,171
18,552
20,619
J Leung
Trading and Profit and Loss Account for the year ended 31 March 2010
£
Sales
Less Cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent and rates
Insurance
Electricity expenses
Motor expenses
Salaries and wages
General expenses
Net Profit
133,171
42,828
6,708
1,312
2,219
2,429
26,855
3,466
£
153,080
90,343
62,737
Chapter 16: Trading account and profit and loss account of a sole trader
16.3
42,989
19,748
41
Answers
Chapter 17: The Balance Sheet
17.1
G Singh
Balance Sheet as at 31 December 2010
£
Fixed Assets
Buildings
Motor vehicle
Current Assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current Liabilities
Creditors
£
£
20,000
12,000
20,000
12,000
32,000
32,000
10,192
7,800
6,616
160
24,768
6,418
6,418
Net current assets
18,350
50,350
Financed by
Cash introduced
48,000
11,300
Add Net profit for the year
59,300
8,950
Less Drawings
50,350
Chapter 17: The Balance Sheet
17.2X
R Cairns
Balance Sheet as at 30 June 2010
Fixed assets
Premises
Computer equipment
Motor vehicle
Current assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current liabilities
Creditors
Net current assets
Financed by:
Capital introduced
Add Net profit for the year
Less Drawings
£
£
£
145,000
8,000
-
145,000
8,000
16,500
-
16,500
169,500
-
169,500
11,498
9,498
6,541
-
27,537
3,618
3,618
23,919
193,419
185,000
20,619
205,619
12,200
193,419
42
17.3
J Leung
Balance Sheet as at 31 March 2010
£
Fixed Assets
Buildings
Equipment
Motor van
£
£
120,400
17,028
15,050
120,400
17,028
15,050
152,478
152,478
Current Assets
Stock
Debtors
Cash at bank
42,828
29,283
4,876
76,987
Less Current Liabilities
Creditors
13,975
13,975
Working Capital
63,012
215,490
Financed by
Capital
Net profit
212,736
19,748
232,484
16,994
Less Drawings
215,490
17.4X
Sarah Joshi
Trading and Profit and Loss Account for the
year ended 31 May 2010
Net Profit
85,691
14,998
3,000
822
3,473
605
12,465
1,319
578
£
103,658
70,693
32,965
22,262
10,703
Chapter 17: The Balance Sheet
£
Sales
Less Cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent
General expenses
Motor expenses
Printing and stationery
Wages and salaries
Heating and lighting
Insurance
43
Balance Sheet as at 31 May 2010
Fixed Assets
Buildings
Computer equipment
Motor vehicle
Current Assets
Stock
Debtors
Cash at bank
Less Current Liabilities
Creditors
Net current assets / working capital
Less Long-term liabilities
Financed By:
Capital
Add Net profit
Less Drawings
£
£
£
180,000
3,600
-
180,000
3,600
19,800
-
19,800
203,400
-
203,400
14,998
11,398
13,850
40,246
4,343
4,343
35,903
239,303
237,240
10,703
247,943
8,640
Chapter 17: The Balance Sheet
239,303
44
Answers
Chapter 18: Financial statements:
other considerations
18.1
K Jepson
Trading account for the year ended 31-Dec-10
£
Sales
Less cost of goods sold
Opening stock
Add purchases
Add carriage inwards
12,463
47,536
1,206
Less closing stock
61,205
13,480
Gross profit
47,725
22,011
Jane Li
Trading and Profit and Loss Account for the year ended 31 March 2010
£
Sales
Less Cost of Goods Sold
Opening Stock
Add Purchases
Add Carriage Inwards
29,686
66,429
2,020
Less Closing Stock
98,135
33,307
Gross profit
£
98,280
64,828
33,452
Chapter 18: Financial statements: other considerations
18.2X
£
69,736
45
18.3
J Mann
Trading and Profit and Loss Account for the year ended 31 July 2010
£
Sales
Less sales returns
Less cost of goods sold
Opening stock
Add Purchases
Add carriage inwards
Less purchase returns
Less Closing stock
Chapter 18: Financial statements: other considerations
Gross Profit
Less Expenses
Salaries and wages
Rent
Motor Expenses
General expenses
Carriage outwards
18.4X
70,560
39,270
10,521
3,066
6,552
882
1,659
Net Profit
22,680
16,590
Emily Hart
Trading and Profit and Loss Account for the year ended 31 December 2010
£
Sales
Less sales returns
Less Cost of Goods Sold
Opening Stock
Add Purchases
Add Carriage Inwards
Less Purchase Returns
Less Closing Stock
Gross Profit
Less Expenses
Wages
Rent and rates
General expenses
Carriage outwards
Printing and stationery
Net Profit
46
11,949
65,100
3,570
80,619
1,176
79,443
8,883
£
110,859
1,029
109,830
34,732
122,683
400
157,815
3,000
154,815
32,984
£
189,050
2,850
186,200
121,831
64,369
21,875
2,800
684
931
525
26,815
37,554
S Shah
Trading and Profit and Loss Account for the year ended 30 June 2010
£
£
178,560
1,968
176,592
Sales
Less sales returns
Less cost of goods sold
Opening stock
Add Purchases
Add carriage inwards
22,733
113,990
2,976
139,699
3,091
136,608
28,320
Less purchase returns
Less Closing stock
Gross Profit
Less Expenses
Salaries and wages
Rent and rates
Insurance
Motor Expenses
Telephone and internet
Electricity
Carriage outwards
General expenses
108,288
68,304
37,075
2,918
749
4,250
4,198
1,594
1,920
3,014
55,718
Net Profit
12,586
Balance Sheet as at 30 June 2010
£
Fixed Assets
Buildings
Computer equipment
Motor vehicles
Current Assets
Stock
Debtors
Cash at bank
Less Current Liabilities
Creditors
Net Current Assets (Working Capital)
Less long-term liabilities
Long-term loans
Financed by
Capital account
Balance b/f
Add net profit for the year
Less Drawings
£
80,000
3,360
17,280
100,640
£
80,000
3,360
17,280
100,640
28,320
37,402
4,627
70,349
32,618
32,618
37,731
138,371
Chapter 18: Financial statements: other considerations
18.5
Nil
138,371
137,305
12,586
149,891
11,520
138,371
47
18.6X
J Collins
Trading and Profit and Loss Account for the year ended 31 March 2010
£
Sales
Less Cost of sales
Opening stock
Add Purchases
Carriage inwards
£
15,104
46,224
936
62,264
19,992
Less Closing stock
Gross Profit
Less Expenses
Salaries and wages
Carriage outwards
Rent
Rates
Printing and stationery
Travel expenses
Telephone
Sundry expenses
11,788
1,304
1,824
1,080
810
490
756
2,808
Chapter 18: Financial statements: other considerations
Net Profit
48
£
74,400
42,272
32,128
20,860
11,268
Balance Sheet as at 31 March 2010
£
Fixed Assets
Fixtures and fittings
Computer equipment
Current Assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current Liabilities
Creditors
Net Current assets
Financed by:
Capital
Add net profit
Less Drawings
£
2,400
9,600
12,000
£
2,400
9,600
12,000
19,992
18,308
15,504
480
54,284
12,180
12,180
42,104
54,104
51,376
11,268
62,644
8,540
54,104
Answers
Chapter 19: The concept of depreciation
of fixed assets
19.1
J Chen
(b) Reducing Balance
Cost
Year 1
Depreciation*
£
£
6,000
6,000
1,250
Year 1
Depreciation 40% 3
£6,000
3,600
4,750
Year 2
Depreciation
1,250
Year 2
Depreciation 40% 3
£3,600
3,500
Year 3
Depreciation
1,250
Depreciation
1,250
1,440
2,160
Year 3
Depreciation 40% 3
£2,160
2,250
Year 4
2,400
864
1,296
Year 4
Depreciation 40% 3
£1,296
1,000
519
777
6,000 2 1, 000
*Depreciation 5 _____________
5 £1,250
4
19.2
Machine
(a) Straight Line
(b) Reducing Balance
Cost
Year 1
Depreciation*
£
£
75,000
75,000
11,070
Year 1
Depreciation 20% 3
£75,000
63,930
Year 2
Depreciation
11,070
60,000
Year 2
Depreciation 20% 3
£60,000
52,860
Year 3
Depreciation
11,070
Depreciation
11,070
30,720
12,000
48,000
Year 3
Depreciation 20% 3
£48,000
41,790
Year 4
15,000
9,600
Chapter 19: The concept of depreciation of fixed assets
(a) Straight Line
38,400
Year 4
Depreciation 20% 3
£38,400
7,680
30,720
75,000 2 30,720
*Depreciation 5 _______________
5 £11,070
4
49
19.3X
(a)
Reducing Balance
Cost
Year 1
Year 2
Year 3
Year 4
£
19,200
9,600
9,600
4,800
4,800
2,400
2,400
1,200
1,200
Depreciation 50% of 19,200
Depreciation 50% of 9,600
Depreciation 50% of 4,800
Depreciation 50% of 2,400
(b)
Chapter 19: The concept of depreciation of fixed assets
Straight Line
Cost
Year 1
Year 2
Year 3
Year 4
£
19,200
4,500
14,700
4,500
10,200
4,500
5,700
4,500
1,200
Depreciation
Depreciation
Depreciation
Depreciation
19,200 2 1,200 5 18,000 4 4 5 4,500
19.4X
Computer Equipment
(a) Straight Line
Cost
Year 1
Depreciation
Year 2
Depreciation
3,600
1,000
Year 2
Year 3
Depreciation
2,600
1,000
Year 3
Year 4
Depreciation
1,600
1,000
Year 4
Depreciation 4,600 2 600 £1,000
*___________________________________
4
50
(b) Reducing Balance
£
4,600
* 1,000
600
Cost
Year 1
Depreciation 25% 3
4,600
Depreciation 25% 3
3,450
Depreciation 25% 3
2,588
Depreciation 25% 3
1,941
£
4,600
1,150
3,450
862
2,588
647
1,941
485
1,456
19.5X
(a)
Reducing Balance
£
Cost
Year 1
72,900
Depreciation 33 __13 % of 72,900
24,300
Year 2
48,600
Depreciation 33 __13 % of 48,600
16,200
Year 3
32,400
Depreciation 33 __13 % of 32,400
10,800
Year 4
21,600
Depreciation 33 __13 % of 21,600
7,200
Year 5
14,400
Depreciation 33 __13 % of 14,400
4,800
9,600
(b)
£
Cost
Year 1
72,900
Depreciation
Year 2
60,240
Depreciation
Year 3
12,660
12,660
47,580
Depreciation
12,660
34,920
Year 4
Depreciation
Year 5
Depreciation
12,660
22,260
12,660
9,600
72,900 2 9,600 5 63,300 4 5 5 12,660
Chapter 19: The concept of depreciation of fixed assets
Straight Line
51
19.6
Dumper
(a) Reducing Balance
(b) Straight Line
£
Cost
Year 1
18,000
Depreciation 40% 3
£18,000
Year 2
Year 3
Year 1
Depreciation
Year 2
13,000
Depreciation
Year 3
Depreciation
5,000
2,592
3,888
18,000 2 3,000
19.7X
(a) Machinery has straight line depreciation; fixtures has reducing balance.
Chapter 19: The concept of depreciation of fixed assets
5,000
8,000
Depreciation ______________
£5,000
3
52
5,000
4,320
6,480
Depreciation 40% 3
£6,480
18,000
7,200
10,800
Depreciation 40% 3
£10,800
£
(b) Machinery: 4,800 2 1,600 2 1,600 1,600
Fixtures: 2,025 2 506 2 380 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.)
3,000
Answers
Chapter 20: Double entry for depreciation and
disposal of a fixed asset
20.1
(a)
Motor Car Account
Dr
2001
Jan-01
Cr
£
12,500
Bank
£
Dr
2001
Dec-31
2002
Dec-31
Provision for Depreciation - Motor Car Account
Cr
Balance c/d
£
2,500
2001
Dec-31
Profit and loss a/c
Balance c/d
4,500
2002
Jan-01
Dec-31
Balance b/d
Profit and loss a/c
2,500
2,000
4,500
2003
Jan-01
Dec-31
Balance b/d
Profit and loss a/c
4,500
1,600
6,100
2004
Jan-01
Balance b/d
6,100
4,500
2003
Dec-31
Balance c/d
6,100
6,100
£
2,500
(c)
Profit 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
2001
Motor Car
Cost
£
12,500
Total Depreciation
£
2,500
Net book value
£
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 fixed asset
(b)
53
20.2X
(a)
Straight Line Method
Dr
Machinery Account
2001
Nov 01
Bank
Dr
Chapter 20: Double entry for depreciation and disposal of a fixed asset
Balance c/d
2004
Oct 31
2004
Oct 31
(c)
5,400
5,400
2002
Oct 31
Cr
Profit and loss a/c
£
1,800
Nov 1
2003
Oct 31
Balance b/d
1,800
Profit and loss a/c
1,800
3,600
Nov 1
Balance b/d
3,600
2004
Oct 31
Profit and loss a/c
1,800
5,400
Nov 1
Balance b/d
5,400
Reducing Balance Method
Machinery Account
2001
Nov 01
2003
Oct 31
3,600
3,600
Balance c/d
Dr
2002
Oct 31
£
1,800
Balance c/d
2003
Oct 31
Dr
£
Provision for Depreciation - Machinery Account
2002
Oct 31
(b)
Cr
£
18,000
Cr
£
18,000
Bank
£
Provision for Depreciation - Machinery Account
Balance c/d
Balance c/d
Balance c/d
£
1,800
3,420
3,420
4,878
4,878
2002
Oct 31
Cr
Profit and loss a/c
£
1,800
Nov 1
2003
Oct 31
Balance b/d
1,800
Profit and loss a/c
1,620
3,420
Nov 1
Balance b/d
3,420
2004
Oct 31
Profit and loss a/c
1,458
4,878
Nov 1
Balance b/d
4,878
Straight Line Method
Profit and Loss Account (extracts) for the year ended 31 October
54
2002
Depreciation - Machinery
£
1,800
2003
Depreciation - Machinery
1,800
2004
Depreciation - Machinery
1,800
Balance Sheet (extracts) as at 31 October
2002
Machinery
Cost
£
18,000
Total Depreciation
£
1,800
Net Book Value
£
16,200
2003
Machinery
18,000
3,600
14,400
2004
Machinery
18,000
5,400
12,600
(d)
Reducing Balance Method
2002
Depreciation - Machinery
£
1,800
2003
Depreciation - Machinery
1,620
2004
Depreciation - Machinery
1,458
Balance Sheet (extracts) as at 31 October
2002
Machinery
Cost
£
18,000
Total Depreciation
£
1,800
Net Book Value
£
16,200
2003
Machinery
18,000
3,420
14,580
2004
Machinery
18,000
4,878
13,122
Computer equipment
disposals
9,500
20.3
(a)
Computer Equipment Account
2001
Jan-01
Balance b/d
9,500
2004
Jan-01
(b)
Provision for Depreciation : Computer Equipment Account
2001
2001
Computer
equipment
Dec-31
Balance c/d
1,900
Jan-01
2002
Dec-31
Balance c/d
3,800
2002
Jan-01
Dec-31
Balance b/d
Profit and loss
1,900
1,900
3,800
2003
Jan-01
Dec-31
Balance b/d
Profit and loss
3,800
1,900
5,700
2004
Jan-01
Balance b/d
5,700
3,800
2003
Dec-31
Balance c/d
5,700
5,700
2004
Jan-01
Computer equipment
disposals
5,700
1,900
Chapter 20: Double entry for depreciation and disposal of a fixed asset
Profit and Loss Account (extracts) for the year ended 31 October
55
(c)
Computer Equipment Disposals Account
2004
Jan-01
Dec-31
Computer
Profit and loss
2004
Jan-01
Jan-01
9,500
450
9,950
Depreciaiton
Bank
5,700
4,250
9,950
(d)
Chapter 20: Double entry for depreciation and disposal of a fixed asset
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
2001
Computer Equipment
Cost
£
9,500
Total Depreciation
£
1,900
Net book value
£
7,600
2002
Computer Equipment
9,500
3,800
5,700
2003
Computer Equipment
9,500
5,700
3,800
Provision for depreciation
9,700
Bank
1,850
20.4X
(a)
Motor Van Disposals Account
Motor Van
12,000
Profit and loss : loss on sale
12,000
450
12,000
(b)
Machinery Disposals Account
Machinery
Profit and loss : profit on sale
27,900
2,770
Provision for depreciation
19,400
Bank
11,270
30,670
30,670
(c)
Fixtures Disposals Account
Fixtures
8,420
Provision for depreciation
Bank
Profit and loss : loss on sale
8,420
56
7,135
50
1,235
8,420
(d)
Buildings Disposals Account
Buildings
200,000
Profit and loss : profit on sale
59,000
Provision for depreciation
110,000
Bank
149,000
259,000
259,000
20.5
(a)
Straight Line Method
_________________
No. of Years
35,000 2 11,000
£6,000 per annum
______________
Cost 2 Scrap Value
(b)
Provision for Depreciation - Vehicles Account
Dr
2005
Mar-31
2006
Mar-31
Balance c/d
Balance c/d
£
7,000
12,600
12,600
2005
Mar-31
Profit and loss
7,000
Balance b/d
7,000
Apr-01
2006
Mar-31
Profit and loss
5,600
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.
Cr
20.6X
(a)
RIALTO TRADERS
Plant and Machinery Account
2007
May 1
Balance b/d
500,000
2007
Dec 31
2008
Apr 30
500,000
2008
May 1
Balance b/d
Plant and machinery
disposals
200,000
Balance c/d
300,000
500,000
Chapter 20: Double entry for depreciation and disposal of a fixed asset
4
300,000
57
(b)
Motor Vehicles Account
2007
May 1
2008
Feb 1
May 1
Balance b/d
200,000
Bank
100,000
300,000
Balance b/d
300,000
2008
Apr 30
Balance c/d
300,000
300,000
(c)
Provision for Depreciation - Plant and Machinery Account
Chapter 20: Double entry for depreciation and disposal of a fixed asset
2007
Dec 31
58
2008
Apr 30
Plant and MachineryDisposals
150,000
Balance c/d
80,000
230,000
2007
May 1
Balance b/d
200,000
2008
Apr 30
Profit and Loss
30,000
230,000
May 1
Balance b/d
80,000
(d)
Plant and Machinery - Disposal Account
2007
Dec 31
Plant and Machinery
200,000
2007
Dec 31
Dec 31
Dec 31
200,000
Provision for
Depreciation
Bank
Profit and Loss
150,000
40,000
10,000
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.
Answers
Chapter 21: Bad debts and provision for
doubtful debts
(a)
Hart & Partners
Dr
Bad Debts Account
2009
May-16
Jul-31
Nov-09
S Bayley
J Carter
T Roche
2009
Dec-31
550
223
467
1,240
Dr
Profit & loss
Provision For Doubtful Debts Account
Cr
Profit & loss
520
Profit and Loss Account for the year ended 31 December 2009 (extracts)
Gross profit
Less Expenses
Bad debts written off
Provision for doubtful debts
(c)
1,240
520
1,760
26,000
520
25,480
Balance Sheet as at 31 December 2009 (extract)
Current Assets
Debtors
Less Provision for doubtful debts
21.2
1,240
1,240
2009
Dec-31
(b)
Cr
Date
31-Dec
2007
2008
2009
2010
Total debtors
7,000
8,000
6,000
7,000
Profit and
loss
70
10
20
10
Dr/Cr
Dr
Dr
Cr
Dr
Final figure for
balance sheet
6,930 (net)
7,920 (net)
5,940 (net)
6,930 (net)
Chapter 21: Bad debts and provision for doubtful debts
21.1
59
21.3X
Bad Debts
2007
31 Dec
2008
31 Dec
Debtors
Debtors
298
2007
31 Dec
Profit and loss a/c
298
386
2008
31 Dec
Profit and loss a/c
386
Profit and loss a/c
344
Profit and loss a/c
477
2009
31 Dec
Debtors
344
2009
31 Dec
2010
31 Dec
Debtors
477
2010
31 Dec
Provision for Doubtful Debts
2007
31 Dec
2008
31 Dec
100
Balance c/d
Balance c/d
130
2007
31 Dec
Profit and loss a/c
100
2008
1 Jan
31 Dec
Balance b/d
Profit and loss a/c
100
30
130
2009
1 Jan
Balance b/d
130
Chapter 21: Bad debts and provision for doubtful debts
130
60
2009
31 Dec
31 Dec
Profit and loss a/c
Balance c/d
15
115
130
130
2010
31 Dec
Balance c/d
150
2010
1 Jan
31 Dec
Balance b/d
Profit and loss a/c
115
35
150
2011
1 Jan
Balance b/d
150
150
Profit and Loss Accounts
for the years ended 31 December (extracts)
2007
Bad debts
Provision for doubtful debts
2008
Bad debts
Provision for doubtful debts
2009
Bad debts
2010
Bad debts
Provision for doubtful debts
£
298
100
£
386
30
344
477
35
2009
Provision for doubtful debts
15
Balance Sheet as at 31 Decemeber (extracts)
Debtors
Less Provision for doubtful debts
£
12,000
100
11,900
2008
Debtors
Less Provision for doubtful debts
15,000
130
14,870
2009
Debtors
Less Provision for doubtful debts
14,000
115
13,885
2010
Debtors
Less Provision for doubtful debts
18,000
150
17,850
2007
£
21.4X (a)
The Journal
Apr30
Bad Debts
A. Carter
Being bad debt written off
Debit
Credit
£
500
£
500
(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.
Chapter 21: Bad debts and provision for doubtful debts
Date
61
Answers
Chapter 22: Accruals, prepayments and other
adjustments for financial statements
22.1
Chapter 22: Accruals, prepayments and other adjustments for financial statements
(a)
C Homer
Rent Account
2008
Dec-31
Dec-31
Bank
Owing c/d
2008
Dec-31
(b)
Profit and loss
2,000
2,000
2009
Jan-01
Owing b/d
400
Profit and loss
Prepaid c/d
635
265
900
Profit and loss
7,381
Insurance Account
2008
Dec-31
Bank
900
2008
Dec-31
Dec-31
900
2009
Jan-01
Prepaid b/d
(c)
265
Motor Expenses Account
2008
Dec-31
Dec-31
Bank
Owing c/d
7,215
166
7,381
2008
Dec-31
7,381
2009
Jan-01
(d)
Owing b/d
166
Rates Account
2008
Jan-01
Bank
Jul-01
Bank
750
2008
Dec-31
Profit and loss
1,125
Dec-31
Prepaid c/d
1,875
2009
Jan-01
Prepaid b/d
(e)
1,500
375
1,875
375
Rents Receivable Account
2008
Dec-31
Dec-31
62
1,600
400
2,000
Profit and loss
In advance c/d
4,800
1,600
6,400
2008
Apr-15
Dec-15
Bank
Bank
2,000
4,400
6,400
2009
Jan-01
In advance b/d
1,600
22.2
(a)
T Norton
General Expenses Account
Bank
Owing c/d
615
56
671
2009
Dec-31
671
671
2010
Jan-01
(b)
Profit and loss
Owing b/d
56
Telephone Account
2009
Dec-31
Dec-31
Bank
Owing c/d
980
117
1,097
2009
Dec-31
1,097
1,097
2010
Jan-01
(c)
Profit and loss
Owing b/d
117
Bank
Owing c/d
3,056
175
3,231
Commission Received Account
2009
Dec-31
Profit and loss
3,231
2009
Dec-31
Dec-31
3,231
2010
Jan-01
Owing b/d
(d)
175
Carriage Outwards Account
2009
Dec-31
Dec-31
Bank
Owing c/d
666
122
788
2009
Dec-31
788
788
2010
Jan-01
(e)
Profit and loss
Owing b/d
122
Insurance Account
2009
Jan-01
Oct-01
Bank
Bank
2010
Jan-01
Prepaid b/d
1,080
1,080
2,160
2009
Dec-31
Dec-31
Profit and loss
Prepaid c/d
1,440
720
2,160
Chapter 22: Accruals, prepayments and other adjustments for financial statements
2009
Dec-31
Dec-31
720
63
22.3X
(a)
T Dale
Stationery Account
2008
01 Jul
2009
30 Jun
Stock b/d
Cash and bank
Chapter 22: Accruals, prepayments and other adjustments for financial statements
(b)
290
855
1,145
Profit and loss
Stock c/d
800
345
1,145
General Expenses Account
2009
30 Jun
30 Jun
Cash and bank
Owing c/d
(c)
590
90
680
2008
01 Jul
2009
30 Jun
Owing b/d
Profit and loss
64
616
680
Rent and Rates Account
2008
01 Jul
2009
30 Jun
30 Jun
Cash and bank
Owing c/d
3,890
360
2009
30 Jun
30 Jun
Owing b/d:
Rent
Rates
Profit and loss
Rent prepaid
and c/d
4,250
(d)
160
205
3,635
250
4,250
Motor Expenses Account
2009
30 Jun
Cash and bank
4,750
30 Jun
Owing c/d
375
5,125
(e)
2008
01 Jul
Owing b/d
2009
30 Jun
Profit and loss
180
4,945
5,125
Commission Receivable Account
2008
01 Jul
2009
30 Jun
Owing b/d
Profit and loss
80
915
995
64
2009
30 Jun
2009
30 Jun
2009
30 Jun
30 Jun
Cash and bank
Owin c/d
850
145
995
C Cainen
Trading and Profit and Loss Account
for the year ended 31 December 2009
£
Sales
Less cost of goods sold
Opening stock
Add Purchases
Less Closing stock
Gross Profit
Less Expenses
Rent (640 2 160)
Wages and salaries (2,140 1 290)
Insurance (590 2 190)
Bad debts
Telephone (300 1 110)
General Expenses
Net Profit
22.5
£
18,590
2,050
11,170
13,220
3,910
9,310
9,280
480
2,430
400
270
410
180
4,170
5,110
K Tyler
Trading and Profit and Loss Account for the year ended 31 December 2010
Sales
Less Sales returns
Less cost of goods sold
Opening stock
Add Purchases
Less Closing stock
Gross Profit
Less Expenses
Wages and salaries (£4,960 1 £510)
Motor expenses
Rent and rates (£1,200 2 £160)
Discounts allowed
Lighting expenses (£580 1 £170)
Computer running expenses (£1,210 2 £140)
General expenses
Depreciation : Motor vehicles
Net Profit
£
54,190
200
8,620
30,560
39,180
12,120
5,470
2,120
1,040
290
750
1,070
360
700
£
53,990
27,060
26,930
11,800
15,130
Chapter 22: Accruals, prepayments and other adjustments for financial statements
22.4
65
22.6X
J Sears
Trading and Profit and Loss Account
for the year ended 31 December 2010
Chapter 22: Accruals, prepayments and other adjustments for financial statements
Sales
Less Sales returns
Less Cost of goods sold:
Opening stock
Add Purchases
Less Purchase returns
Less Closing stock
Gross Profit
Less Expenses
Wages and salaries (7,200 1 450)
Telephone (200 2 20)
Bad debts
Provision for doubtful debts (1,960 3 10% 2 160)
Depreciation:
Store fittings
Motor van
Net Profit
20,000
70,000
90,000
1,240
88,760
24,000
64,760
14,240
7,650
180
40
36
800
1,200
9,906
4,334
J Sears
Balance Sheet as at 31 December 2010
Cost
Fixed Assets
Store fittings
Motor van
8,000
6,000
14,000
Current Assets
Stock
Debtors
Less Provision for doubtful debts
Prepaid expenses
Bank
1,960
196
Less Current Liabilities
Creditors
Expenses owing
Net current assets
1,400
450
Financed by:
Capital
Balance 1.1.2010
Add Net profit
Less Drawings
66
80,000
1,000
79,000
Depreciation
Net Book
Value
800
1,200
2,000
7,200
4,800
12,000
24,000
1,764
20
600
26,384
1,850
24,534
36,534
35,800
4,334
40,134
3,600
36,534
Answers
Chapter 23: Incomplete records
23.1
(a)
Total Debtors
Balances b/d
Sales (difference)
2,760
14,940
17,700
Cash
Balances c/d
14,610
3,090
17,700
Total Creditors
Cash
Balances c/d
(b)
9,390
1,320
10,710
Balances b/d
Purchases (difference)
1,080
9,630
10,710
K Rogers
Trading Account for the year ended 31 October 2009
£
Sales
Less Cost of Goods sold
Opening Stock
Add Purchases
2,010
9,630
11,640
2,160
Less Closing Stock
Gross Profit
23.2X
£
14,940
9,480
5,460
2008
1 Jun
2009
31 May
Balance b/d
Sales
5,670
45,550
51,220
2009
31 May
Bank
45,112
31 May
Balance c/d
6,108
51,220
Balances b/d
3,410
Total Creditors
2009
31 May
31 May
Bank
Balances c/d
29,375
4,126
33,501
2008
1 Jun
2009
31 May
Purchases
30,091
33,501
Chapter 23: Incomplete records
Total Debtors
Trading Account for the year ended 31 May 2009
£
Sales
Less Cost Of Goods Sold
Opening Stock
Add Purchases
Less Closing Stock
Gross Profit
11,590
30,091
41,681
13,425
£
45,550
28,256
17,294
67
23.3 (a) Capital is £6,000
(b)
D Lewinski
Balance Sheet as at 30 June 2009
£
Fixed assets
Plant
Fixtures
£
36,000
3,600
39,600
Current assets
Stock
Debtors
Bank
Cash
13,500
9,300
6,000
1,350
30,150
Less Current Liabilities
Creditors
Net current assets
7,200
22,950
62,550
Financed by:
Capital
Cash introduction
Add Net profit
60,000
18,550
78,550
16,000
Less Drawings
62,550
23.4
J Marcano
Statement of Affairs as at 31 August 2009
Chapter 23: Incomplete records
£
68
Fixed assets
Fixtures
Motor Van
Current assets
Stock
Debtors
Bank
Cash
£
3,500
3,500
7,000
16,740
11,890
2,209
115
30,954
Less Current liabilities
Creditors
9,952
21,002
28,002
Statement of Affairs as at 31 August 2009
£
Fixed assets
Fixtures
Less Depreciation
Motor Van
Less Depreciation
£
5,500
300
3,500
700
Current assets
Stock
Debtors
Bank
Cash
£
5,200
2,800
8,000
24,891
15,821
72
84
40,868
Less Current liabilities
Trade creditors
Expenses owing
Bank overdraft
Net current assets
6,002
236
165
6,403
34,465
42,465
Capital
Balance as at 31/08/2009
Add Cash introduced
Add Net profit
(C)
(B)
Less Drawings
28,002
12,800
9,223
50,025
7,560
(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.
42,465
23.5X
(a)
Total Debtors Account
Dr
2008
1 Apr
2009
31 Mar
Balances b/d
Cr
2,980
Sales
11,520
2009
31 Mar
31 Mar
Cash
Balances
(difference) c/d
14,500
Dr
2009
31 Mar
31 Mar
14,500
Total Creditors Account
Cash
Balance (difference) c/d
7,780
2,220
10,000
10,820
3,680
2008
1 Apr
2009
31 Mar
Chapter 23: Incomplete records
(A)
Cr
Balance b/d
1,880
Purchases
8,120
10,000
69
(b)
A Hanson
Calculation of Capital as at 31 March 2008 and 31 March 2009
31.3.2008
£
1,460
600
2,320
60
2,980
7,420
1,880
5,540
Bank
Office furniture
Stock
Cash
Debtors
Less Creditors
Capital
(c)
Capital as at 31 March 2008
Add Net profit
(B)
(A)
31.3.2009
£
1,740
500
2,620
80
3,680
8,620
2,220
6,400
£
5,540
3,400
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.
23.6X
(a) (i)
Total Debtors Account
Chapter 23: Incomplete records
Dec-01
70
Balances b/d
Sales
450
7,628
8,078
Calculation of Sales
Credit Sales
Cash Sales
Drawings 12 3 £1,500
£
7,628
200,552
18,000
226,180
Nov 30
Nov 30
Bank
Balance c/d
7,500
578
8,078
(ii)
Rent Account
Dec 01
Nov 30
Balance b/d
Bank
Nov 30
Nov 30
Bank
Balance c/d
(iii)
Nov 30
Nov 30
Profit and loss
Balance c/d
8,760
490
9,250
Nov 30
Profit and loss
700
Dec 1
Balance b/d
700
100
Loan Interest Account
600
100
700
he loan interest needs adjusting so that the amount incurred for the year is
T
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.
Chapter 23: Incomplete records
(b)
350
8,900
9,250
71
Answers
Chapter 24: Accounting for non-profit
making organisations
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'.
Chapter 24: Accounting for non-profit making organisations
(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 equivalent of a business's profit for a non-profit making organisation.
24.2
(a)
Horton Hockey Club
Receipts and Payments Account
for the year ended 30 June 2009
Receipts
Bank balance b/f
Subscriptions
Donations
Receipts from raffles
2,715
8,570
1,500
3,816
1,598
3,891
392
4,800
General expenses
419
Prizes for raffles
624
Bank balance c/f
4,877
16,601
16,601
(b)
Horton Hockey Club
Income and Expenditure Account
for the year ended 30 June 2009
Income:
Subscriptions (8,570 1 160)
Donations
Profit on raffles (3,816 2 624)
Less Expenditure:
Teams' travel expenses
Groundsman's wages (3,891 1 75)
Postage and stationery
Rent of pitches and club house (4,800 1 400)
General expenses
Surplus of income over expenditure
72
Payments
Teams' travel expenses
Groundsman wages
Postage and stationery
Rent of pitches and club house
8,730
1,500
3,192
13,422
1,598
3,966
392
5,200
419
11,575
1,847
24.3X
(a)
Superball Football Club
Receipts and Payments Account for the year ended 31 May 2009
Receipts
Cash & bank balnces b/d
Subscriptions
Disco receipts
Collections at matches
Prize money
905
8,124
3,149
5,090
1,000
Payments
Hire of transport
Ground maintenance costs
Groundsman's wages
Committee expenses
Costs of disco
3,710
1,156
5,214
906
1,112
Rent of ground
2,450
General expenses
814
Cash & bank balances c/d
18,268
2,906
18,268
Superball Football Club
Income and Expenditure Account for the year ended 31 May 2009
Income:
Subscriptions (8,124 2 160 1 94)
Profit on disco (3,149 2 1,112)
Collections at matches
Prize money received
8,058
2,037
5,090
1,000
16,185
Less Expenditure:
Hire of transport (3,710 1 90)
3,800
Ground maintenance costs
1,156
Groundsman's wages
5,214
Committee expenses (906 1 170)
1,076
Rent of ground (2,450 2 200)
2,250
General expenses
Surplus of income over expenditure
814
14,310
1,875
Chapter 24: Accounting for non-profit making organisations
(b)
73
24.4
(a) Accumulated fund as at 1 June 2007:
£
Bar Stocks
88
Equipment
340
Bank Balance
286
714
(b)
Down Town Sports and Social Club
Bar Trading Account
Year Ended 31 May 2008
£
Bar Takings
Less Cost of goods sold
Opening stock
£
463
88
Add Purchases
397
485
Chapter 24: Accounting for non-profit making organisations
Less Closing Stock
74
101
384
79
Gross Profit
(c)
Down Town Sports and Social Club
Income and Expenditure Account
Year Ended 31 May 2008
£
Income
Subscriptions (135 1 14)
Net proceeds of jumble sale
Net proceeds of dance
£
149
91
122
Gross profit from bar
79
441
Less Expenditure
Wages
198
Hire of rooms
64
Loss on sale of equipment (92 2 80)
12
Depreciation : equipment
30
Surplus of income over expenditure
304
137
24.5X
(a)
Sevenoaks College Drama Society
Trading Account
Year Ended 31 December 2010
£
Sale of refreshments
Less cost of goods sold
Opening stock
100
Add Purchases
845
£
1,200
945
Less Closing Stock
165
780
420
Gross Profit
(b)
Income
Subscriptions
Profit on sale of refreshments
Ticket sales
£
£
1,600
420
4,000
6,020
Expenditure
Hire of costumes (1,500 - 650)
850
Rent of theatre
750
Administrative expenses
440
*Depreciation of scenery
2,000
4,040
Surplus of income over expenditure
1,980
(c)
Balance Sheet as at 31 December 2010
£
Fixed Assets
Scenery (at valuation)
Current Assets
Stock of refreshments
Less Current Liabilities
Subscriptions in advance
Bank Overdraft
£
£
12,500
165
90
595
685
(520)
11,980
Represented by
Accumulated Fund
Add Surplus of income over expenditure
* Workings - Scenery - Balance as at 1 January 2010
Add Purchase of new scenery
Less Value as at 31 December 2010
Depreciation
Chapter 24: Accounting for non-profit making organisations
Income and Expenditure Account
Year Ended 31 December 2010
10,000
1,980
11,980
7,500
7,000
14,500
14,000
2,000
75
Chapter 24: Accounting for non-profit making organisations
24.6X (a) Accumulated fund – this is a form of capital account for a non-profit making
organisation and represents the net worth of club. It can be found by
deducting liabilities from the assets.
A surplus is the amount that income exceeds expenditure and is the same as
the profit made by a business.
(b) In the balance sheet subscriptions in arrears would appear under Current
Assets and rent of cricket pitch accrued under Current Liabilities.
(c) (i) Receipts and payments account – is a summary of the cash book for a
club or society and details all cash received and payments made.
(ii) Current Assets.
(iii) Payment for the purchase of a fixed asset.
(iv) Depreciation of a fixed asset.
(d) Since the donation is a substantial amount it would be added to the
accumulated fund in the balance sheet. The reason for this is that the
donation is not a regular income but a one off receipt and as such should
not be shown on the income expenditure account.
76
Answers
Chapter 25: Manufacturing accounts
25.1
E Smith
Manufacturing and Trading Account
for the year ended 31 March 2009
Less Stock of raw materials 31.3.2009
Cost of raw materials consumed
Manufacturing wages
Prime cost
Add factory overhead expenses
Rent and rates
Power
2,300
6,220
Other expenses
1,430
£
2,400
21,340
321
24,061
2,620
21,441
13,280
34,721
Less Work in progress 31.3.2009
9,950
44,671
955
45,626
870
Production cost of goods completed c/d
44,756
Sales
69,830
Add Work in progress 1.4.2008
Less Cost of goods sold
Stock finished goods 1.4.2008
Add Production cost of goods completed b/d
Less Stock finished goods 31.3.2009
Gross profit
6,724
44,756
51,480
7,230
44,250
25,580
Chapter 25: Manufacturing accounts
£
Stock of raw material 1.4.2008
Add Purchases
Carriage inwards
77
25.2X
P Lucas
Manufacturing, Trading and Profit and Loss Account
for the year ended 30 September 2009
£
£
Stock of raw materials 1.10.2008
Add Purchases
Carriage inwards
38,720
2,720
Less Stock of raw materials 30.9.2009
Cost of raw materials consumed
Manufacturing wages
Prime cost
Factory Overhead Expenses
Power
Factory expenses
Depreciation: Plant and machinery
6,120
12,650
7,560
Add Work-in-progress 1.10.2008
Less Work-in-progress 30.9.2009
Production cost of goods completed c/d
Sales
Chapter 25: Manufacturing accounts
78
86,840
99,220
14,570
Less Stock of finished goods 30.9.2009
Gross profit c/d
Less Expenses:
Salesmen's salaries and expenses
26,420
Office and administration expenses
25,910
Net Profit
26,330
86,230
3,070
89,300
2,460
86,840
12,380
Add Production cost of goods completed b/d
Office equipment
41,440
49,900
10,970
38,930
20,970
59,900
174,610
Less Cost of goods sold:
Stock of finished goods 1.10.2008
Delivery van expenses
Advertising
Depreciation:
Delivery van expenses
£
8,460
84,650
89,960
5,890
5,080
3,040
807
3,847
67,147
22,813
25.3X
(a)
Joey Peterson
Manufacturing Account for the year ended 30 June 2010
£
Stock of raw materials 1.7.2009
Add Purchases
Less Stock of raw material 30.6.2010
Cost of raw materials consumed
Direct Wages (450,000 1 8,900)
Direct factory power
Prime cost
Add Indirect manufacturing cost
Factory rent and rates
Indirect factory wages
General expenses
96,000
98,600
14,400
Insurance (66,900 2 6,900) 3 __ 13
20,000
Depreciation : Plant and Machinery
50,000
Add Work in progress 1.7.2009
Less Work in progress 30.6.2010
£
81,600
314,000
395,600
94,500
301,100
458,900
40,000
800,000
279,000
1,079,000
125,300
1,204,300
154,300
Production Cost
1,050,000
(b)
Sales
Less Cost of goods sold
Stock of finished goods 1.7.2009
Add Production Cost
Less Stock of furnished goods 30.6.2010
2,000,000
115,440
1,050,000
1,165,440
85,440
Gross Profit
1,080,000
920,000
25.4X
(a) (i) Cost of raw materials consumed £560,000
(ii) Prime cost £1,280,000
(iii) Total factory overheads £740,000
(iv) Value of closing stock of work in progress £80,000
£3,000,000
(b) (i) Selling price of one engine 1 £2,000,000 1 50% 5 _____________
1,000 engines
5 £3,000
(ii) Total gross profit 5 750 engines 3 £1,000 5 £750,000
(iii) Value of closing stock of finished goods based on factory cost of
production : 250 engines 3 £2,000 5 £500,000
Chapter 25: Manufacturing accounts
Trading Account for the year ended 30 June 2010
79
Answers
Chapter 26: Partnership accounts
26.1
(a)
Stead and Jackson
Appropriation Account
for the year ended 31 December 2010
£
45,000
5,000
40,000
Net profit
Less Salary: Jackson
Balance of profits shared:
1
__
Stead
2
Jackson
20,000
1
__
20,000
2
40,000
(b)
Capital Account
Stead
Jackson
2010
Dec 31 Balance b/d
Stead
Jackson
24,000
16,000
Stead
Jackson
2,300
20,000
22,300
3,500
5,000
20,000
28,500
7,300
9,500
(c)
Chapter 26: Partnership accounts
Current Accounts
2010
Dec 31 Drawings
Dec 31 Balances c/d
Jackson
15,000
7,300
19,000
9,500
22,300
28,500
2010
Dec 31 Balance b/d
Dec 31 Salary
Dec 31 Share of profits
2011
Jan 1 Balance b/d
26.2X (a)
Wain, Brown and Cairns
Appropriation Account for the year ended 31 March 2010
£
Net profit
Less: Salaries
Wain
10,000
Brown
8,000
Balance of profits shared:
Wain 50%
80
Stead
£
60,000
18,000
42,000
21,000
Brown 30%
12,600
Cairns 20%
8,400
42,000
(b)
Capital Accounts
Wain
Brown
Cairns
2010
Mar 31
Balance b/d
Wain
Brown
Cairns
30,000
50,000
70,000
Wain
Brown
Cairns
2,400
3,100
5,700
10,000
8,000
—
21,000
12,600
8,400
Current Accounts
Wain
2010
Mar 31
Drawings
Mar 31
Balances c/d
Brown
Cairns
12,000
15,050
14,980
21,400
8,650
—
2010
Mar 31
Balance b/d
Mar 31 Salaries
Mar 31 Share
of profits
Mar 31
Balances c/d
33,400
2010
Apr 1
Balance b/d
—
23,700
—
14,980
880
2010
Apr 1
Balance b/d
880
33,400
23,700
14,980
21,400
8,650
—
26.3
Simpson and Young
Tradign and Profit and Loss Appropriation Account
for the year ended 30 June 2010
Opening stock
18,000
Add Purchases
184,980
202,980
19,000
Less Closing stock
Gross profit
Less Expenses:
Wages and salaries (32,700 500)
Rent, Rates and insurance (3,550 250)
Electricity
Stationery and printing
Motor expenses
General office expenses
Depreciation: Motor van (20% of 16,000)
Office equipment (10% of 5,600)
Net profit
Less interest on capital:
Simpson (10% of 50,000)
Young (10% of 20,000)
Share of profits:
Simpson 3/5ths
Young 2/5ths
33,200
3,300
980
420
3,480
1,700
3,200
560
5,000
2,000
10,020
6,680
£
254,520
183,980
70,540
Chapter 26: Partnership accounts
£
Sales
Less Cost of sales:
46,840
23,700
7,000
16,700
16,700
81
Simpson and Young
Balance Sheet as at 30 June 2010
Cost
Fixed assets
Buildings
Office equipment
Motor vans
Chapter 26: Partnership accounts
Current assests
Stock
Debtors
Prepayments
Cash at bank
Less Current liabilites
Creditors
Accruals
Net current assets
Financed by:
Capital accounts
Balance b/f
82
Current accounts
Balance b/f
Add Share fo profit
Add Interest on capital
Less Drawings
£
Accumulated
Depreciation
£
28,000
8,400
16,000
52,400
3,360
8,200
11,560
19,000
28,000
250
7,250
54,500
15,200
500
15,700
28,000
5,040
7,800
40,840
Simpson
50,000
Young
20,000
Total
70,000
640
10,020
5,000
15,660
10,000
5,660
300
6,680
2,000
8,980
5,000
3,980
9,640
79,640
(W1) Provision for depreciation on office equipment:
8,400 5,600 560 3,360
(W2) Provision for depreciation on motor vans:
(W1)
(W2)
38,800
79,640
Net Book
Value
£
16,000 11,000 3,200 8,200
26.4X
(a)
Michael and Morgan
Profit and Loss Account (Including Appropriation)
for the year ended 30 September 2009
£
£
385,000
15,000
400,000
Gross Profit
Add Discounts Received
Less Expenses
Administrative Expenses
Advertising (7,375 125)
Rent and rates (12,000 2 1,500)
Wages and salaries (135,000 5,000)
Depreciation - Shop fittings *
Net Profit
Less Salary - Michael
6,790
7,500
10,500
140,000
12,000
Share of profits: Michael 2/5ths
Morgan 3/5ths
176,790
223,210
30,000
193,210
77,284
115,926
193,210
2
(b)
Balance b/d
Drawings
Balance c/d
1,500
9,650
96,259
107,409
Sep 30
Sep 30
Sep 30
Salary
Profit share
Advertising
30,000
77,284
125
107,409
Oct 01
Balance b/d
96,259
(c)
Michael and Morgan
Balance Sheet Extract as at 30 September 2009
Micheal
50,000
Morgan
40,000
(1,500)
2,000
Add Share of Profits
77,284
115,926
Add Salary
30,000
2
Capital Accounts Balance
Current Accounts
Balance
Add Advertising
Less Drawings
125
2
105,909
117,926
9,650
8,200
96,259
109,726
Total
90,000
Chapter 26: Partnership accounts
Michael — Current Account
Oct 01
Sep 30
Sep 30
205,985
295,985
* Workings
Shop fittings : Cost
Less : Depreciation to date
£
76,000
28,000
48,000
Reducing Balance Method 5 25% 3 £48,000 5 £12,000
83
Answers
Chapter 27: Limited company accounts
27.1
(a)
C Blake Ltd
Appropriation Account for the year ended 31 December 2009
£
Net profit b/d
Less Appropriations
Transfer to General Reserve
Dividends payable:
£
11,340
1,500
1,000
7,500
Preference dividend 10% (£10,000 3 10%)
Ordinary dividend 12.5% (£60,000 3 12.5%)
10,000
1,340
Retained profits carried forward to next year
C Blake Ltd
Balance Sheet as at 31 December 2009
(b)
Fixed Assets
Buildings at cost
Equipment at cost
Less Accumulated depreciation
£
£
45,000
4,500
£
50,000
40,500
Chapter 27: Limited company accounts
90,500
Current Assets
Stock
Debtors
Less Provision for doubtful debts
8,800
4,120
350
Bank (balancing figure)
Cash
3,770
9,660
2,160
24,390
Less Creditors: amounts falling due within one year
Creditors
Dividends payable (£1,000 1 £7,500)
3,550
8,500
12,050
12,340
102,840
Less Creditors: amounts due after more than one year
30,000
Debentures
72,840
Financed by:
Share Capital
Called-up share capital
60,000 ordinary £1 shares
10,000 preference £1 shares
Revenue reserves
General reserve
Profit and loss account
60,000
10,000
1,500
1,340
70,000
2,840
72,840
Note: The Authorised Share Capital is 90,000 £1 ordinary shares and 10,000 - 10% preference shares.
84
27.2X
(a)
Reynolds Ltd
Profit and Loss Appropriation Account for the year ended 30 September 2010
£
Net profit
Add Retained profits b/f from last year
Less Appropriations:
General reserve
Dividends payable:
Ordinary shares — (150,000 3 6p) Paid
— (150,000 3 14p) Proposed
Preference shares — (7% 3 50,000) Proposed
Retained profits carried to next year
£
70,000
30,000
100,000
8,000
9,000
21,000
3,500
41,500
58,500
(b)
Reynolds Ltd
Balance Sheet as at 30 September 2010 (Extract)
£
Financed by:
Called-up share capital
Preference shares
Ordinary shares
50,000
150,000
200,000
53,000
58,500
111,500
311,500
Note: The Authorised Share Capital is 200,000 £1 ordinary shares and 50,000 - 7% preference shares.
Chapter 27: Limited company accounts
Revenue Reserves
General Reserve (45,000 1 8,000)
Profit and loss account
£
85
27.3
Chang Ltd
Trading and Profit and Loss Account
for the year ended 31 December 2010
Sales
Less Cost of goods sold:
Opening stock
Add Purchases
316,810
25,689
201,698
Less Closing stock
227,387
29,142
Gross profit
Less Expenses
Wages and salaries (54,207 1 581)
Rent (4,300 2 300)
Lighting expenses
Bad debts
Provision for doubtful debts (938 2 861)
General expenses
Deprecation: Machinery (55,000 3 10%)
198,245
118,565
54,788
4,000
1,549
748
77
32,168
5,500
98,830
Net profit
Add Retained profits b/f from last year
19,735
34,280
Less Proposed dividend
Retained profits c/f to next year
54,015
10,000
44,015
Chapter 27: Limited company accounts
Balance Sheet as at 31 December 2010
Fixed Assets
Premises
Machinery
Less Aggregated depreciation (15,800 1 5,500)
Current Assets
Stock
Debtors
Less Provision for doubtful debts
65,000
55,000
21,300
33,700
98,700
29,142
21,784
938
Prepayments
Bank
20,846
300
23,101
73,389
Less Creditors falling due wihtin one year
Dividend payable
Creditors
Expenses owing
Net current assets
10,000
17,493
581
28,074
45,315
144,015
Financed by:
Capital and reserves
Called -up share capital
Revenue reserves
Profit and loss account
100,000
44,015
144,015
86
27.4X
(a)
Wayland Limited
Appreciation Account for the year ended 31 December 2010
£ '000's
Net profit
Add Profit and Loss Balance 1st January 2010
Less Appropriations
Transfer to general reserve
Preference dividend (6% 3 250,000)
Ordinary dividend 2 (Interim Dividend)
2 (8% 3 750,000)
Retained profits carried forward
25
15
20
60
£ '000's
250
195
445
120
325
(b)
Cost
Fixed Assets
Land and buildings
Fixtures and fittings
Motor vehicles
Current Assets
Stock
Debtors
Bank
Current Liabilities
Creditors
Value added tax
Dvidends Payable:
Preference shares
Ordinary shares
Working capital
£ '000's
Aggregate
Depreciation
£ '000's
Net Book
Value
£ '000's
1,500
50
—
10
1,500
40
85
15
70
1,635
25
1,610
165
103
107
375
135
25
15
60
235
140
1,750
Creditors: amounts falling due after one year 5%
debentures
250
1,500
Capital and Reserves
Called up capital
Ordinary shares
6% Preference shares
Capital reserves
Share premium
Revenue Reserves
General reserve
Profit and loss account shareholders' funds
750
250
Chapter 27: Limited company accounts
Wayland Limited
Balance Sheet as at 31 December 2010
1,000
100
75
325
400
1,500
87
Answers
Chapter 28: Analysis and interpretation
of financial statements
N Ltd
28.1 (a) M Ltd
(i) Current ratio
£200,000
________
4:1
£50,000
£130,000
________
2:1
£65,000
(ii) Acid test ratio
£200,000 2 £100,000
___________________
2:1
£50,000
£130,000 2 £64,000
__________________
1:1
£65,000
(iii) Stockturn
£288,000
______________________
2.6 times
Chapter 28: Analysis and interpretation of financial statements
£120,000 1 £100,000 4 2
88
£187,500
____________________
3.0 times
£60,000 1 £64,000 4 2
(iv) Debtors : Sales ratio
£60,000
________
12 months 2 months
£360,000
£62,500
________
12 months 3 months
£250,000
(v) Creditors : Purchases ratio
£50,000
________
12 months 2.2 months
£268,000
£65,000
________
12 months 4 months
£191,500
(vi) Gross profit %
£72,000
________
100% 20%
£360,000
£62,500
________
100% 25%
£250,000
(vii) Net profit %
£43,200
________
100% 12%
£360,000
£35,000
________
100% 14%
£250,000
(viii) Rate of return on shareholders' sunds
£43,200
________
100% 12.3 %
£350,000
£35,000
________
100% 13.7%
£255,000
(b) Briefly N Ltd gives a better return to shareholders because of (viii) above.
Reasons include:
• M Ltd's current ratio is higher. This indicates that M Ltd is in a better liquidity
position.
• N Ltd’s stock turnover is higher than that of M Ltd. This shows that N Ltd manages
its sales performance more effectively.
• The gross profit percentage of N Ltd is 5% higher than that of M Ltd. This is due to
better purchasing and selling prices. Net profit margins differ by a smaller margin
of 2% suggesting, that M Ltd has tighter control of its overhead expenses when
compared with its sales volume (8% compared with 11%)
(a)
Cruise Furnishings
Holmes Supplies
(i) Gross profit margin
600
_____
100 33 __1 %
600
_____
100 25%
(ii) Net profit margin
150
_____
100 8.33%
1,800
160
_____
100 6.67%
(iii) Current ratio
210
____
3.18 : 1
66
180
____
3:1
1,800
3
2,400
2,400
60
(b) Rate of stock tunover for Cruise Furnishings
1200
_____
10 Times a year
120
(c)
Profitability
Both businesses are making good net profits, Cruise £150,000 and Holmes
£160,000. However, both the gross profit percentage and net profit percentage
for Cruise is better than Holmes, with the net profit percentage being 8.33% for
Cruise against Holmes 6.67%. This could be due to Cruise selling goods at a higher
price and their cost of sales being lower.
Liquidity
The current ratio for both Cruise and Holmes are very similiar with cruise being
slightly higher at 3.18 : 1 against Holmes 3 : 1. If we calculate the acid test, i.e, we
remove stock from the calculation,
Cruise
210 2 111
__________
1.5 : 1
66
Holmes
180 2 120
__________
1:1
60
then Cruise is in a stronger position since it could raise £1.50 for every £1 owed
compared to Holmes who could raise £1 for every £1 of debt.
Conclusion
Whilst Holmes has a greater turnover than Cruise the company is not as
profitable. In terms of liquidity again Cruise is in a stronger position which may in
part be due to Holmes long term liabilities of £2,070,000.
Chapter 28: Analysis and interpretation of financial statements
28.2
89
28.3X (a)
Year Ended
28.02.2009
29.02.2010
Net Profit Margin
Net profit
16,000
26,000
_________
35,000
____
100 45.71% ______
____
100 50%
____
100 ______
52,000
Sales
1
1
1
(b)
Mark — up
21,600
35,500
____________
Gross Profit
____
100 _______
100 161.19% ________
100 215.15%
Cost of Sales
1
*13,400
*2,900 1 14,500 2 4,000 5 13,400
**16,500
**4,000 1 19.500 2 7,000 5 16,500
(c)
Chapter 28: Analysis and interpretation of financial statements
Rate of stock turnover
90
13,400
16,500
Cost of sales
_____________
________________
_________________
2,900 1 4,000 4 2
4,000 1 7,000 4 2
Average Stock
3.88 times 3 times
(d)
Overall the profitability of the buisness is improving with the Net Profit % increasing
from 45.71% to 50%. Mark-up has also increased considerably from 161.19% to 215.15%.
However, the stock is taking longer to sell/turnover a decrease from 3.88 to 3 times
a year. This is possibly due to the business stock in hand increasing from £2,900 at the
beginning of the first financial year to £7,000 at the end of February 2010?
Answers
Chapter 29: Computers and
accounting systems
29.1
To:
From:
Date:
Re:
Director of Finance
Administrative Assistant
June 2010
Proposed Integrated Computerised Accounting System
Arguments against the new system
• The cost of the installation plus ongoing costs of maintenance and
updating software.
• Training costs of staff.
• Staff resentment of new system.
• System downtime may be disruptive.
• Fraudulent access can seriously affect business operation and
profitability.
• Security measures that are necessary.
• Health and safety issues associated with using computers.
29.2
Measures a medium-sized company may adopt to safeguard the security of its
financial data and records would include:
• All company’s financial information should be regarded as confidential
except where legislation states otherwise. Staff should be made aware of this
requirement in the company’s code of conduct.
• Staff should be allocated passwords to monitor accessibility to specific areas
of work.
• Passwords need to be changed frequently.
• Installation of anti-virus computer packages to prevent the threat of fraud.
• Ensure data is saved and backed up regularly.
• Store back-up data in an off-site location if deemed necessary.
Chapter 29: Computers and accounting systems
Points in favour of the new system:
• Faster data input and automatic processing.
• Greater accuracy especially via automatic processing.
• Documentation such as invoices, credit notes, statements, remittance
advices produced automatically.
• Up-to-date information on customers’ accounts, etc. is readily
available.
• Provides management information.
• The system may be linked to the internet to allow for transactions
such as ordering goods to be carried out electronically.
• Provides access to the organisation’s bank account via the internet.
• More efficient and makes better use of resources.
29.3X Refer to text, Sections 29.3 and 29.4.
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Chapter 29: Computers and accounting systems
29.4X (a) Benefits to a small business when it has the use of internet facilities would
include:
• access to web sites to obtain further information in many areas including
competitors, product ranges, location of customers/suppliers etc
• transactions such as ordering, purchasing, selling, making payments to
customers and staff, receiving monies etc., can all be carried out online
• the use of email for correspondence is quick, efficient and cost effective.
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(b) A web designer would bring many benefits to a business as follows:
• development of initial user-friendly web site
• maintain an up-to-date web site
• develop online facilities for business to offer online ordering and purchasing
from suppliers and sales to customers
• promote a range of company products/services over a wider area which
could lead to increased sales and ultimately greater profits
• advertising and marketing benefits to a larger consumer market.
(c) The disadvantages of offering a web site service:
• keeping the web site up-to-date
• the cost of maintaining the web site
• ensuring that the web site is user friendly with appropriate easy to navigate
links.
29.5X Benefits of investing in a computerised accounting system would include:
• quick and easy to install
• capital outlays reasonable since packages are now much cheaper
• less time to carry out book-keeping/accounting transactions
• easier/less onerous work
• more financial information available for management
• greater accuracy
• can process documents, e.g. invoices, credit notes, statements, payslips etc
Adverse effects:
• cost and disruption on installation
• training
• reluctance to change by staff
• security issues
• health risks
• problems if the system goes down.
29.6 Other business uses for a computerised accounting system would be:
• Payroll
• Book-keeping
• Budgeting
• Preparation of financial statements
• Cash management.
