AAT Level 3

FSTPIncomplete Records

Sudoku Puzzle8 1 2 4

53 6 7

1 9 4 7 65 8

6 27 2 1

5 8 6 33 9

Incomplete Records Tool Kit

Mark up & Margin

Accounting Equation

Control Accounts

Bank & Cash

The Accounting Equation

Accounting Equation

The Accounting Equation

Assets = Capital + LiabilitiesOr

Capital = Assets – LiabilitiesOr

Liabilities = Capital - Assets

The Accounting EquationAssets £325,000Capital £125,000 Liabilities?

Assets = Capital + Liabilities

£325,000 = £125,000 + Liabilities£325,000 - £125,000 = Liabilities

£200,000 = Liabilities

Calculate the Capital Invested £

Fixtures and fittings at cost 7,000

Accumulated depreciation - fixtures and fittings 4,000

Motor vehicles at cost 12,000

Accumulated depreciation - motor vehicles 6,800

Inventories 4,500

Trade receivables 5,200

Bank 1,230

Trade payables 3,700

Prepayments 450

Accruals 2,000

Calculate the Capital Invested £

Fixtures and fittings at cost 7,000

Accumulated depreciation - fixtures and fittings (4,000)

Motor vehicles at cost 12,000

Accumulated depreciation - motor vehicles (6,800)

Inventories 4,500

Trade receivables 5,200

Bank 1,230

Trade payables 3,700

Prepayments 450

Accruals 2,000 Assets £7000 + £12,000 + 4,500 + 5,200 + 1,230 + 450 – 4000 – 6800 = 19580

Calculate the Capital Invested £

Fixtures and fittings at cost 7,000

Accumulated depreciation - fixtures and fittings (4,000)

Motor vehicles at cost 12,000

Accumulated depreciation - motor vehicles (6,800)

Inventories 4,500

Trade receivables 5,200

Bank 1,230

Trade payables 3,700

Prepayments 450

Accruals 2,000 Liabilities 3,700 + 2,000 = 5700

Calculate the Capital Invested £

Fixtures and fittings at cost 7,000

Accumulated depreciation - fixtures and fittings (4,000)

Motor vehicles at cost 12,000

Accumulated depreciation - motor vehicles (6,800)

Inventories 4,500

Trade receivables 5,200

Bank 1,230

Trade payables 3,700

Prepayments 450

Accruals 2,000

Assets = Capital + Liabilities

Assets – Liabilities = Capital

£19,580 – £5,700 = Capital £13,880

Have a go at this one . . . . . . £

Vehicles at cost 13,500

Accumulated depreciation - Vehicles (5,000)

Machinery at cost 12,500

Accumulated depreciation - Machinery (3,125)

Inventories 3850

Trade receivables 7,365

Bank 8525

Trade payables 9,200

Prepayments 290

Accruals 340

W3S1 Worksheet 1Calculate Capital

What are net assets?

Total AssetsMinusTotal

Liabilities

Calculating Closing CapitalQuestion 1

Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year.

What was her closing capital for the year?

Calculating Closing Capital

Opening Capital (Net Assets)

Less Drawings

Add Profit

Closing Capital

Question 1

Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year.

What was her closing capital for the year?

Calculating Closing Capital

Opening Capital (Net Assets) £20,450

Less Drawings

Add Profit

Closing Capital

Question 1

Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year.

What was her closing capital for the year?

Calculating Closing Capital

Opening Capital (Net Assets) £20,450

Less Drawings (£1,500)

Add Profit

Closing Capital

Question 1

Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year.

What was her closing capital for the year?

Calculating Closing Capital

Opening Capital (Net Assets) £20,450

Less Drawings (£1,500)

Add Profit £3,200

Closing Capital

Question 1

Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year.

What was her closing capital for the year?

Calculating Closing Capital

Opening Capital (Net Assets) £20,450

Less Drawings (£1,500)

Add Profit £3,200

Closing Capital £22,150

Question 1

Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year.

What was her closing capital for the year?

W3S1 Calculating Capital Worksheet 1

Continue with the practice questions (2-5)

Opening Capital (Net Assets)

Additional Capital

Less Drawings

Add Profit

Closing Capital

Net Assets = Capital

So:

Net Assets = Capital + Profit – Drawings

If Net Assets increase (or decrease) during a year then one, two or each of capital introduced, profit (or loss) and drawings must have changed.

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Net Assets at 01/06/X3 12794

Receivables 3358Payables 5065Motor Vehicle 11239Accruals 735Bank Balance 1401Cash 566Fixtures and Fitting 9562Prepayments 708Inventory 4871Loan 3902Drawings 1923Capital 5000

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Net Assets at 01/06/X3 12794

Receivables 3358Payables 5065Motor Vehicle 11239Accruals 735Bank Balance 1401Cash 566Fixtures and Fitting 9562Prepayments 708Inventory 4871Loan 3902Drawings 1923Capital 5000

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Net Assets at 01/06/X3 12794

Receivables 3358Payables 5065Motor Vehicle 11239Accruals 735Bank Balance 1401Cash 566Fixtures and Fitting 9562Prepayments 708Inventory 4871Loan 3902Drawings 1923Capital 5000

Identify the Assets & Liabilities

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Net Assets at 01/06/X3 12794

Receivables 3358Payables 5065Motor Vehicle 11239Accruals 735Bank Balance 1401Cash 566Fixtures and Fitting 9562Prepayments 708Inventory 4871Loan 3902Drawings 1923Capital 5000

Identify the Assets & Liabilities

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Net Assets at 01/06/X3 12794

Receivables 3358Payables 5065Motor Vehicle 11239Accruals 735Bank Balance 1401Cash 566Fixtures and Fitting 9562Prepayments 708Inventory 4871Loan 3902Drawings 1923Capital 5000

Total Assets£31,705

Identify the liabilities

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Net Assets at 01/06/X3 12794

Receivables 3358Payables 5065Motor Vehicle 11239Accruals 735Bank Balance 1401Cash 566Fixtures and Fitting 9562Prepayments 708Inventory 4871Loan 3902Drawings 1923Capital 5000

Identify the liabilities

Total liabilities£9702

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Total liabilities£9,702

Total Assets

£31,705 Less

Equals Net Assets£22,003

W3S1 Calculating Capital Worksheet 2Calculate the profit for the y/e 31 May 20X4

Opening Net Assets

£22,003

£12,794

Closing Net Assets

Change in Net Assets £9,209

Net Assets = Capital + Profit – Drawings

Change in net assets of £9209

Caused by£5000 additional CapitalLess£1923 drawings

SO £6132 must be the increase in profit

W3S1 Calculating Capital Worksheet 2

Complete remaining questions on worksheet 2

Methods - Mark-ups and margins

Are used to apply information about known relationships between cost, profit and selling price to determine gross profit. M

ark up & Margin

MarginThe Profit margin is the percentage of gross profit made expressed as a percentage of sales.

Sales will always equal the cost of sales and the profit added together.

Sales (Represent the 100%)Cost of Sales 80% Profit 20%

MarginThe Profit margin is the percentage of gross profit made expressed as a percentage of sales.

Sales will always equal the cost of sales and the profit added together.

Sales (Represent the 100%) £2500Cost of Sales 80% 20%

Now we know this we can used it to find any ‘missing’ information.

MarginThe Profit margin is the percentage of gross profit made expressed as a percentage of sales.

Sales will always equal the cost of sales and the profit added together.

Sales (Represent the 100%) £2500Cost of Sales (80%) £2000 £500 (20%)

Now we know this we can used it to find any ‘missing’ information.

Margin - Examples

SalesCost of Sales £65,000 Profit 15%

SalesCost of Sales 65% £4,000

Sales £100,000Cost of Sales Profit 25%

Sales £65,500Cost of Sales Profit 35%

Margin – Examples - Answers

Sales £76,471Cost of Sales £65,000 Profit £11,471

Sales £11,429Cost of Sales £7,429 Profit £4,000

Sales £100,000Cost of Sales £75,000 Profit £25,000

Sales £65,500Cost of Sales £42,575 Profit £22,925

Mark-up• A percentage of the cost of sales added to the

cost in order to calculate the selling price.

• When using this method the cost of sales will always represent 100%.

Sales 125%Cost of Sales100% Profit 25%

Sales £5625 (125%)Cost of Sales £4500 (100%) Profit 1125 (25%)

Mark Up - Examples

Sales £150,000Cost of Sales Profit 35%

Sales 140%Cost of Sales £2500

Sales £5500Cost of Sales Profit 15%

SalesCost of Sales £50,000 Profit 25%

Mark Up – Examples - Answers

Sales £150,000Cost of Sales £111,111 Profit £38,889

Sales £8,750Cost of Sales £6,250 £2,500

Sales £5,500Cost of Sales £4,783 Profit £717

Sales £62,500Cost of Sales £50,000 Profit £12,500

W3S1 Mark up & Margin worksheet

MethodReceivables & Payables Control Accounts

Receivables and payables control accounts may be constructed to identify any one missing figure from the control account. Note that you may need to set up and use several standard workings for the control accounts to find the link to complete the missing information.

Control Accounts

Sales Ledger Control Account

Trade Receivables AccountDebtors Control Account

What do we know about the SLCA?

Dr Sales Ledger Control Account CR

Sales Invoices issued Credit notes issued

Receipts from Debtors

Discounts Allowed

Balance b/d

Balance b/d

Cash Received £73,300

Balance c/d £3,200How it works . . . . .

Using the information above find Credit Sales value.

Balance b/d £6,000

Dr Sales Ledger Control Account CR

Credit Sales £70,500

Cash Received £73,300

Balance c/d £3,200How it works . . . . . Find Credit Sales

Balance b/d £6,000

Balance b/d £6,000

Balance c/d £3,200

Cash Received £73,300

£76,500 £76,500

Now try ths one . . . . . . .

Dr Sales Ledger Control Account CR

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850,Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Dr Sales Ledger Control Account CROpening Balance £4,750

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Dr Sales Ledger Control Account CROpening Balance £4,750

Sales Day Book £75,850

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Dr Sales Ledger Control Account CROpening Balance £4,750 Sales Returns £16,350

Sales Day Book £75,850

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Dr Sales Ledger Control Account CROpening Balance £4,750 Sales Returns £16,350

Sales Day Book £75,850 Discounts Allowed £398

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Dr Sales Ledger Control Account CROpening Balance £4,750 Sales Returns £16,350

Sales Day Book £75,850 Discounts Allowed £398

Closing Balance £5,785

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Dr Sales Ledger Control Account CROpening Balance £4,750 Sales Returns £16,350

Sales Day Book £75,850 Discounts Allowed £398

Closing Balance £5,785

£80,600 £80,600

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Dr Sales Ledger Control Account CROpening Balance £4,750 Sales Returns £16,350

Sales Day Book £75,850 Discounts Allowed £398

Bank Receipts £58,067

Closing Balance £5,785

£80,600 £80,600

Calculate the bank receipts from debtorsOpening balance £4,750, Invoices issued £75,850Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350

Purchase Ledger Control Account

Trade Payables AccountCreditors Control Account

What do we know about the PLCA?

Dr Purchase Ledger Control Account CR

Invoices Received

Credit Notes ReceivedDiscounts Received

Payments madeBalance c/d

Balance b/d

Dr Purchase Ledger Control Account CR

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

Dr Purchase Ledger Control Account CRBalance b/d £7,450

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

Dr Purchase Ledger Control Account CRBalance b/d £7,450

Purchases £99,355

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

Dr Purchase Ledger Control Account CRBalance b/d £7,450

Purchases £99,355

Balance c/d £9,855

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

Dr Purchase Ledger Control Account CRPurchase Returns £16,350 Balance b/d £7,450

Purchases £99,355

Balance c/d £9,855

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

Dr Purchase Ledger Control Account CRPurchase Returns £16,350 Balance b/d £7,450

Bank Payments £80,000 Purchases £99,355

Balance c/d £9,855

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

Dr Purchase Ledger Control Account CRPurchase Returns £16,350 Balance b/d £7,450

Bank Payments £80,000 Purchases £99,355

Balance c/d £9,855

106,805 106,805

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

Dr Purchase Ledger Control Account CRPurchase Returns £16,350 Balance b/d £7,450

Bank Payments £80,000 Purchases £99,355

Discounts Received £600

Balance c/d £9,855

106,805 106,805

Calculate the Discounts received from creditors.Opening balance £7,450, Invoices received £99,355Closing balance £9,855, Purchase Returns £16,350Bank payments £80,000

VAT Control Account

Dr VAT Control Account Cr

VAT Control Account VAT on purchases Balance due to HMRC

VAT on sales returns VAT on sales

VAT on cash purchases VAT on purchases returns

VAT on expenses VAT on cash sales

Payment to HMRC Refund from HMRC

Balance due from HMRC

Control AccountPractice Questions

- Method - The Cash & Bank Account Approach

Used to construct records of cash and bank transactions as a basis for identifying and classifying those transactions into items of income or expense, or that they relate to changes in items included in the statement of financial position.

Now try this . . .

Opening Bank Balance £3,580

Cheque payments: Salary £7,500Rent £600 Rates £350Purchases £19,500 The closing balance on the bank statement was £7,450 but a cheque payment of £1250 to a supplier had not yet been presented at the year end.What is the value of the receipts into the bank for the year?

£ £

Balance b/d 3,580

Balance c/d 7,450

Salary 7,500

Purchases 19,500

Rates 350

Rent 600

Bank

35,400

£ £

Balance b/d 3,580

Balance c/d 7,450

Salary 7,500

Purchases 19,500

Rates 350

Rent 600

Bank

35,40035,400

£ £

Balance b/d 3,580

Balance c/d 7,450

Receipts

Salary 7,500

Purchases 19,500

Rates 350

Rent 600

Bank

35,40035,400

£ £

31,820

Balance b/d 3,580

Balance c/d 7,450

Receipts

Salary 7,500

Purchases 19,500

Rates 350

Rent 600

Bank

35,40035,400

Bank Practice Questions

Now try this. . .Hint – You will need a bank account AND a cash Account

During the year £53,000 was received in cash from customers for sales. Cash expenses totalled £950 and £51,200 was paid into the bank.

Opening Bank Balance £27,500 Cash £1,800Cheque payments: Salaries £23,800 Rent £4,600 Rates £2,350 Purchases £28,450 The closing balance on the bank statement was £16,700, but a payment for £2,800 had not yet been presented at the year end.The owner has withdrawn money freom the bank for his own use but doesn’t know how much.

£ £

78700 78700

Balance b/d 27,500

Balance c/d 13,900

51,200Cash receipts

Salaries 23,800

Purchases 28,450

Rates 2,350

Rent 4,600

Drawings

Bank

5,600

£ £

54800 54800

Balance b/d 1800

Balance c/d 2650

53000Cash receipts Bank 51200

Expenses 950

Cash

Trading account (Mark up)

6000 (50%)Gross profit12000 (100)Cost of sales

1000Closing inventories1300011000Purchases2000Opening inventories

Cost of sales18000 (150%)Sales (50% mark up)

££

Trading account (Margin)

28000 (70%)Gross profit12000 (30%)Cost of sales (30% Margin)

2750Closing inventories1475011250Purchases3500Opening inventories

Cost of sales40000 (100%)Sales

££

You will need to remember• The accounting equation

(Assets = Capital + Liabilities)

• Net assets EQUALS Capital

• Control Account Layouts - SLCA, PLCA, VAT

• Accruals & Prepayments double entry

• ETBs and end-of-year adjustments

• Margin & Mark up