Edexcel IGCSE Accounting Answers

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1.1 Good financial control is important to ensure the continued profitability and success of the business. Also to control costs and cash flow.

1.2X Profit is obtained by selling goods for more than the purchase price less expenses incurred in selling the goods.

1.3 (a) Trading and Profit and Loss Account (b) Balance Sheet

1.4X A sole trader may incur the following drawbacks whilst trading alone:Liable for all the debts of the business If a loss is made he/she bears all the losses May lack expertise in certain areas Often has to work long hours

Positive outcomes:Independent and responsible for all decision making If successful and a profi t is made they keep all the profi ts Able to offer personal service to customers

(Any one from the above would be acceptable as an answer)

1.5 The rules which lay down the way in which the activities of a business are recorded and the financial statements, i.e. Trading and Profit and Loss Account and Balance Sheet prepared.

1.6 (a) Going concern concept when a business is assumed to continue for a long time.

(b) Accrual concept where profit is the difference between revenues and expenses in a specific period and not the difference between cash received and cash paid.

(c) Consistency concept applying the same method of accounting when dealing with specific items such as depreciation and in stock valuation.

(d) Prudence concept an accountant is always very careful not to over value specific assets such as stock or machinery etc., and to identify any potential liabilities. It is their duty to prepare the accounts as accurately as possible to give a fair figure of profit.

1.7X (a) Materiality (b) Business entity (c) Money measurement (d) Prudence

1.8 Employees would be interested in their employers financial results for the following reasons:

The ability to pay wages and salaries Secure employment with the opportunity to progress within the business Continued profi tability Sound cash fl ow position Sales maintained and increasing Business viable for the forthcoming period Healthy customer base

(Any three of the above would be acceptable as an answer)

Chapter 1: Introduction to accounting principles

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2.1 (a) Purchases - asset (b) Office equipment - asset (c) Bank loan - liability (d) Cash in hand - asset (e) Motor vehicle - asset (f) Loan from financial company - liability

2.2X Wrong: Assets Liabilities Money owing to bank Motor van Stock of goods

2.3 Account to be Debited Account to be Credited

(a) Cash Capital

(b) Bank Cash

(c) Purchases Cash

(d) Of ce Machinery Bank

(e) Stationery Cash

2.4X Account to be debited Account to be credited (a) Bank Capital (b) Purchases Cash (c) Motor car Bank (d) Cash Uncle Joe loan (e) Motor expenses Cash (f) Computer equipment Cash

2.5 Max Morgan

Bank Account

Jan-01 Capital 30,000 Jan-05 Purchases 2,770

Jan-15 Sales 500 Jan-07 S/H Van 4,800

Jan-27 Computer Equipment

2,100

Jan-30 Purchases 1,090

Capital Account

Jan-01 Bank 30,000

Purchases Account

Jan-05 Bank 2,770

Jan-30 Bank 1,090

Van Account

Jan-07 Bank 4,800

Cash Account

Jan-09 Sales 680 Jan-10 Of ce Furniture 110

Jan-29 Sales 325 Jan-22 Motor Expenses 92

Chapter 2: Double entry for cash transactions

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Sales Account

Jan-09 Cash 680

Jan-15 Bank 500

Jan-29 Cash 325

Office Furniture Account

Jan-10 Cash 110

Motor Expenses Account

Jan-22 Cash 92

Computer Equipment Account

Jan-27 Bank 2,100

2.6X

Jane Mellor Cash Account

May 1 Capital 22,000 May 3 Bank 20,000

May 20 Sales 328 May 22 Stationery 72

Capital Account

May-01 Cash 22,000

Bank Account

May 3 Cash 20,000 May 7 Rent 500

May 25 Sales 560 May 10 Purchases 1,700

May 15 Display units 400

May 23 Purchases 400

May 31 S/H Van 3,000

Rent Account

May 7 Bank 500

Purchases Account

May 10 Bank 1,700

May 23 Bank 400

Display Units Account

May 15 Bank 400

Sales Account

May 20 Cash 328

May 25 Bank 560

Stationery Account

May 22 Cash 72

Van Account

May 31 Bank 3,000

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3.1 Account to be Debited Account to be Credited(a) Purchases P. Hart

(b) Cash Sales

(c) Motor Car Morgan Motors

(d) Purchases Cohens Ltd

(e) P. Hart Purchase Returns

(f) H. Perkins Sales

(g) Bank Sales

(h) Cash Offi ce Furniture

3.2X Account to be debited Account to be credited (a) Computer equipment J. Kershaw (b) Stationery Cash (c) Purchases J. Leung (d) Daswami & Co Sales (e) Purchases Bank (f) Sales returns Daswani & Co (g) Cash Sales (h) J. Leung Purchase Returns

3.3 Kendrick Products

Cash Account

Jan-01 Capital 20,000 Jan-05 Bank 18,000

Jan-24 Stationery 45

Capital Account

Jan-01 Cash 20,000

Purchases Account

Jan-02 T. Peters 2,543

Jan-07 J. Leigh 349

Jan-09 Bank 592

T. Peters Account

Jan-18 Purchase Returns 160 Jan-02 Purchases 2,543

Jan-26 Bank 2,383

Bank Account

Jan-05 Cash 18,000 Jan-09 Purchases 592

Jan-26 T. Peters 2,383

J. Leighs Account

Jan-07 Purchases 349

Sales Account

Jan-16 P. Lamond 210

Jan-26 D. Gurkan 1,008

P. Lamond Acccount

Jan-16 Sales 210 Jan-30 Sales Returns 60

Purchase Returns Account

Jan-18 T. Peters 160

Chapter 3: Double entry for credit transactions

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Stationery Account

Jan-24 Cash 45

D. Gurkan Account

Jan-26 Sales 1,008

Sales Returns Account

Jan-30 P. Lamond 60

Motor Van Account

Jan-31 Harper Motors Ltd 5,250

Harper Motors Ltd Account

Jan-31 Motor Van 5,250

3.4X Mark & Co

Bank Account

Apr 1 Capital 40,000 Apr 14 Purchases 2,300

Apr 28 C. Chang 950

Apr 30 Ash Car Sales 5,400

Capital Account

Apr 01 Bank 40,000

Purchases Account

Apr 3 E. Shah 845

Apr 5 C. Chang 950

Apr 14 Bank 2,300

Apr 20 E. Shah 920

E. Shah Account

Apr 16 Purchase returns 72 Apr 03 Purchases 845

Apr 20 Purchases 920

C. Chang Account

Apr 28 Bank 950 Apr 05 Purchases 950

Motor Van Account

Apr 09 Ash Car Sales 10,400

Ash Car Sales Account

Apr 30 Bank 5,400 Apr 09 Motor Van 10,400

Sales Account

Apr 12 Naik Bros 147

Apr 23 Cash 369

Apr 29 Curtis & Co 420

Naik Bros Account

Apr 12 Sales 147

Purchase Returns Accounts

Apr 16 E. Shah 72

Cash Account

Apr 23 Sales 369 Apr 26 Motor Expenses 40

Curtis & Co Account

Apr 29 Sales 420


Apr 26 Cash 40

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4.1

Capital

May-01 Bank 2,500

Bank

May-01 Capital 2,500 May-12 K Gibson 76

May-09 C Bailey 250 May-12 D Ellis 370

May-10 H Spencer 150 May-31 C Mendez 87

May-31 Balance c/d 2,367

2,900 2,900

Jun-01 Balance b/d 2,367

Cash

May-06 Sales 500 May-08 Rent 120

May-15 Stationery 60

May-19 Rent 120

May-31 Balance c/d 200

500 500

Jun-01 Balance b/d 200

Rent

May-08 Cash 120 May-31 Balance c/d 240

May-19 Cash 120

240 240


Stationery

May-15 Cash 60

Purchases

May-02 D Ellis 540 May-31 Balance c/d 1,082

May-02 C Mendez 87

May-02 K Gibson 76

May-18 D Ellis 145

May-18 C Mendez 234

1,082 1,082


Sales

May-31 Balance c/d 1,496 May-04 C Bailey 430

May-04 B Hughes 62

May-04 H Spencer 176

May-06 Cash 500

May-25 C Bailey 90

May-25 B Hughes 110

May-25 H Spencer 128

1,496 1,496


Chapter 4: Balancing of accounts and preparation of a Trial Balance

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H Spencer

May-04 Sales 176 May-10 Bank 150

May-25 Sales 128 May-31 Balance c/d 154

304 304


D Ellis

May-12 Bank 370 May-02 Purchases 540

May-31 Balance c/d 315 May-18 Purchases 145

685 685


C Mendez


May-31 Balance c/d 234 May-18 C Mendez 234

234 234


K Gibson


C Bailey

May-04 Sales 430 May-09 Bank 250


520 520


B Hughes


May-25 Sales 110

172 172


Trial Balance as at 31 May 2010

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Capital 2,500

Bank 2,367

Cash 200

Rent 240

Stationery 60

Purchases 1,082

Sales 1,496

H Spencer 154

D Ellis 315

C Mendez 234

C Bailey 270

B Hughes 172

4,545 4,545

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4.2X (a)

Bank Account

August 1 Capital 22,000 August 1 Rent 1,800

August 14 Sales 980 August 7 Shop fittings 3,230

August 20 Sales 1,300 August 7 Purchases 5,000

August 28 Sales 2,000 August 9 Cash 1,000

August 30 Salaries 2,100

August 30 Balance c/d 13,150

26,280 26,280

Sept 1 Balance b/d 13,150

4.2X

Cash Account

August 9 Bank 1,000 August 9 Stationery 163

August 16 Sundry expenses 28

August 30 Balance c/d 809

1,000 1,000

Sept 1 Balance b/d 809

Sales Account

August 30 Balance c/d 4,280 August 1 Bank 980

August 20 Bank 1,300


4,280 4,280

Sept 1 Balance b/d 4,280

Purchases Account

August 7 Bank 5,000 August 30 Balance c/d 10,700

August 10 Book supplies 4,200

August 25 Delta Books 1,500

10,700 10,700

September 1 balance b/d 10,700

Shop Fittings Account

August 7 Bank 3,230

Capital Account


Rent Account

August 1 Bank 1,800

Stationery Account

August 9 Cash 163

Sundry Expenses Account

August 16 Cash 28

Salaries Account

April 30 Bank 2,100

Book Supplies Accounts

August 10 Purchases 4,200

Delta Books Account

August 25 Purchases 1,500

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4.2X (b)

Jenny Moore Trial Balance as at 31 August 2010

Dr

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Bank 13,150

Cash 809

Sales 4,280

Purchases 10,700

Shop Fittings 3,230

Capital 22,000

Rent 1,800

Stationery 163

Sundry expenses 28

Salaries 2,100

Book Supplies 4,200

Delta Books 1,500

31,980 31,980

4.3

Bank

(1) Capital 15,000 (9) Rent 500

(30) L Clark 440 (11) Rates 190

(30) K Allen 76 (27) Bowman Furnishers 532

(27) Howe Homes 460

(27) W Hunt 2,070

(28) Motor Vehicles 3,000

(30) Bates Motors 5,000

(30) Balance c/d 3,764

15,516 15,516

(1) Balance b/d 3,764

Capital

(30) Balance c/d 15,000 (1) Bank 15,000


Howe Homes

(27) Bank 460 (3) Purchases 460

J Bond

(17) Purchases returns 60 (3) Purchases 620

(30) Balance c/d 780 (20) Purchases 220

840 840

(1) Balance b/d 780

Rent

(9) Bank 500 (30) Balance c/d 500

(1) Balance b/d 500

L Clark

(12) Sales 480 (23) Sales returns 40

(30) Bank 440

480 480

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R Gee

(12) Sales 1,170 (30) Balance c/d 1,170


Purchses Returns

(30) Balance c/d 88 (17) Bowman Furnishers 28

(17) J Bond 60

88 88

(1) Balance b/d 88

Motor Vehicles

(25) Bates Motors 5,000 (30) Balance c/d 8,000

(28) Bank 3,000

8,000 8,000


Stationery

(29) Cash 56 (30) Balance c/d 56

(30) Balance b/d 56

Purchases

(3) Bowman Furnishers 320 (30) Balance c/d 3,930

(3) Howe Homes 460

(3) W Hunt 1,800

(3) J Bond 620

(20) J Bond 220

(20) W Hunt 270

(20) Bowman 240

3,930 3,930


Bowman Furnishers

(17) Purchases returns 28 (3) Purchases 320

(27) Bank 532 (20) Purchases 240

560 560

W Hunt

(27) Bank 2,070 (3) Purchases 1,800

(20) Purchases 270

2,070 2,070

Sales

(30) Balance c/d 2,401 (7) Cash 480

(12) L Clark 480

(12) K Allen 96

(12) R Gee 1,170

(26) Cash 175

2,401 2,401


Rates

(11) Bank 190 (30) Balance c/d 190

(1) Balance b/d 190

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K Allen

(12) Sales 96 (23) Sales returns 20

(30) Bank 76

96 96

Wages

(14) Cash 400 (30) Balance c/d 400

(1) Balance b/d 400

Sales Returns

(23) K Allen 20 (30) Balance c/d 60

(23) L Clark 40

60 60

(30) Balance b/d 60

Bates Motors

(30) Bank 5,000 (25) Motor vehicles 5,000

Cash

(7) Sales 480 (14) Wages 400

(26) Sales 175 (29) Stationery 56

(30) Balance c/d 199

655 655

(1) Balance b/d 199

Trial Balance as at 30 April 2010

Dr

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Bank 3,764

Purchases 3,930

Capital 15,000

J Bond 780

Sales 2,401

Rent 500

Rates 190

R Gee 1,170

Wages 400

Purchases returns 88

Sales returns 60

Motor vehicles 8,000

Stationery 56

Cash 199

18,269 18,269

4.4 (a) Capital credit

(b) Sales credit

(c) Stationary debit

(d) Cash debit

(e) T Khan (creditor) credit

(f) Machinery debit

(g) Rent debit

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(h) D Allen (debtor) debit

(i) Bank loan credit

( j) Purchases debit

4.5 Trial Balance of P Brown as at 31 May 2010

Dr

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Capital 20,000

Drawings 7,000

General expenses 500

Sales 38,500

Purchases 29,000

Debtors 6,800

Creditors 9,000

Bank 15,100

Cash 200

Plant and equipment 5,000

Heating and lighting 1,500

Rent 2,400

67,500 67,500

4.6 Trial Balance of S Higton as at 30 June 2010

Dr

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Capital 19,956

Sales 119,439

Stationery 1,200

General expenses 2,745

Motor expenses 4,476

Cash at the bank 1,950

Stock 1 July 2009 7,668

Wages and salaries 9,492

Rent and rates 10,500

Office equipment 6,000

Purchases 81,753


Rent received 2,139

Debtors 10,353

Drawings 4,200

Creditors 10,230

Motor vehicle 7,500

Interest received 1,725

Insurance 3,444

153,489 153,489

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4.7X Trial Balance of Ms Anita Hall as at 31 December 2010

Dr

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Plant and machinery 21,450

Motor vehicles 26,000

Premises 80,000

Wages 42,840

Purchases 119,856

Sales 179,744

Rent received 3,360

Telephone, printing and stationery 3,600

Creditors 27,200

Debtors 30,440

Bank overdraft 2,216

Capital 131,250

Drawings 10,680

General Expenses 3,584

Lighting and heating 2,960


Motor vehicle

343,770 343,770

4.8X (a) Error of principle

(b) Error of commission

(c) Error of omission

(d) Error of original entry

(e) Complete reversal of entries

(f) Error of principle

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5.1

(a) C BlackCurzon Road

Stockport

INVOICE No 947TDate: 1 March 2011To:

Your Order No. 1697

400.00

470.00

94.0020,000 coils sealing tape x 4.70 per 1,000

180.0040,000 sheets A5 paper x 4.50 per 1,000

126.0030,000 sheets A4 paper x 4.20 per 1,000

70.00 VAT at 17.5%

J Booth89 Andrew LaneStockport

VAT Reg No. 542 4483 95

(b)J Booth's Books

C Black

2011

01-Mar Purchases 470

C Black's BooksJ Booth

2011

01-Mar Sales 470

5.2X (a) & (b) & (c)

2010 Name of Customer Net VAT Total

Jan 2 D Woolham & Co 230.00 40.25 270.25

Jan 6 C Crawford 348.00 60.90 408.90

Jan 7 S Brocklehurst 1,980.00 346.50 2,326.50

Jan 9 L Price & Partners 520.00 91.00 611.00

Jan 13 D Woolham & Co 56.00 9.80 65.80


Jan 21 C Crawford 340.00 59.50 399.50

Jan 24 C Crawford 44.00 7.70 51.70

Jan 29 S Brocklehurst 846.00 148.05 994.05


5,286.00 925.05 6,211.05

Chapter 5: Value Added Tax

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5.3

(a) Cost of 22 reams of paper at 3.75 82.50

Input VAT is 17.5% 82.50 17.5 ____ 100 14.44

96.94

Customer Charged 235.00 including VAT

Amount before VAT is added, 235 100 ______ 117.5 200.00

Therefore, output VAT is 35.00

Amount of VAT due to HMRC, 35.00 14.44 20.56

(b) Net Amount VAT Total

40.00 7.00 47.00

2.00 0.35 2.35

53.28 9.32 62.60

3.20 0.56 3.76

5.4

(a) Ivy & Co

Dr VAT Account Cr

2010 2010

Apr-30 Purchases Day Book 8,750 Apr-30 Sales Day Book 9,205

May-31 Purchases Day Book 7,350 May-31 Sales Day Book 8,400

Jun-30 Purchases Day Book 9,625 Jun-30 Sales Day Book 10,500

Jun-30 Balances c/d 2,380 28,105

28,105

Jul-01 Balance b/d 2,380

(b) The outstanding balance of 2,380 is the amount of VAT due to HMRC for the quarter ending 30th June 2010.

When Ivy & Co pays this amount to HMRC this will clear the amount in the VAT account.

5.5X

Dr VAT Account Cr

2010 2010

Oct 31 Purchases Day Book 6,580 Oct 31 Sales Day Book 13,125

Nov 30 Purchases Day Book 6,895 Nov 30 Sales Day Book 10,850

Dec 31 Purchases Day Book 9,100 Dec 31 Sales Day Book 11,900

Dec 31 Balances c/d 13,300

35,875 35,875

Jan 01 Balance b/d 13,300

(b) All business records must be kept for 6 years.

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6.1 (a) Remittance advice a document which accompanies payments by cheque or via BACS and gives details of the payment made.

(b) Statement this is normally sent to purchasers at the end of each month and it states the amount owing to the supplier at the end of that particular month.

(c) Credit note - a document sent to a customer showing allowance given by supplier in respect of unsatisfactory goods. Usually printed in red to distinguish it from an invoice.

(d) Invoice a document prepared by the seller and sent to the purchaser whenever a business buys goods or services on credit. It gives details of the supplier and the customer, the goods purchased and their price.

6.2 (a) Purchase order

(b) Invoice

(c) Statement

(d) Remittance advice

6.3X Statement of Account to John Ashley Ltd

Dr Cr Balance

May 1 Balance b/forward 101.50

May 2 Invoice No. 7821 43.75 145.25

May 8 Invoice No. 7955 35.00 180.25

May 17 Credit Note No. 304 10.20 170.05

May 23 Invoice No. 8204 74.50 244.55May 28 Cheque 51.50 193.05

The amount outstanding by John Ashley Ltd is 193.05

6.4X (a) Contents of an invoice - refer to text section 6.3

Contents of a credit note - refer to text section 6.4

(b) An invoice is used when a supplier has provided goods and/or services to a customer and wishes to inform them how much is owed.

A credit note is issued by the supplier to 'credit' the buyer in respect of unsatisfactory goods returned.

Chapter 6: Business documentation

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7.1 Newton Data Systems

Type of expenditure Reason(a) Revenue Use up in the short term

(b) Capital Adds to value of computer equipment

(c) Revenue Used up in the short term

(d) Revenue Used up in the short term

(e) Capital Adds to the value of the computer

(f) Question is not clear

(1) If spent on improving building Construction Capital

(2) If spent on extra wages for Security guards Revenue

Adds to the value of xed assets

Used up in the short term

7.2 Cairns Engineering CoCapital Revenue

(a) New stationery and brochures - 411

(b) New pickup truck 18,000 -

(c) New lathe 5,200 -

(d) Delivery costs - lathe 200 -

(e) Electricity - wiring- electricity costs

1,800-

-2,100

(f) Wages - Re: Improvements- Other

20,000-

-45,000

45,200 47,511

Brief description of capital and revenue expenditure - see text

7.3X (a) (i) Capital

(ii) Capital

(iii) Capital

(iv) Revenue

(b) (i) Expenses would be too high and net profit too low

(ii) The value of the fixed assets in the balance sheet would be too low.

Chapter 7: Capital and revenue expenditure

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7.4 (a) (i) Capital expenditure

(ii) Capital expenditure

(iii) Revenue expenditure

(iv) Capital receipt

(v) Revenue expenditure

(vi) Revenue receipt

(vii) Revenue expenditure

(b) It is important to distinguish between capital and revenue expenditure because incorrect treatment of expenditure would result in profits being affected and the balance sheet position becoming distorted.

If capital expenditure is incorrectly treated as revenue expenditure then the net profit will be understated and the assets in the balance sheet undervalued. If revenue expenditure is incorrectly treated as capital expenditure then the net profit would be overstated and the balance sheet position would be overvalued.

7.5X Capital (a), (c), (f)

Revenue (b), (d), (e), (g)

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Chapter 8: Books of original entry and ledgers Sales day book and sales ledger including VAT

8.1 (a) Sales day book / sales ledger / personal account (b) Cash book / general ledger / nominal account (c) Purchases day book / purchases ledger / personal account (d) Cash book / general ledger / nominal account (e) Sales returns day book / sales ledger / personal account (f) Purchases returns day book / purchases ledger / personal account

8.2X (a) (i) Purchase day book: purchase invoices

(ii) Sales returns day book: sales credit notes

(iii) Cash book: cheques received, cheques paid out, cash receipts and cash payments

(iv) Sales day book: sales invoices

(v) Purchase returns day book: purchase credit notes

(b) Personal accounts: contain the accounts of businesses and people i.e. debtors and creditors.

Impersonal accounts: contain the other accounts, divided between real and nominal accounts.

Real accounts: are accounts in which fixed assets and stock are recorded, such as machinery, property, fixtures and fittings.

Nominal accounts: record expenses, income and capital.

8.3 Sales Day Book Date Details Folio Goods VAT Total2010 Nov-02 T Bates 186.00 32.55 218.55Nov-03 D Cope 166.00 29.05 195.05Nov-09 F Chan 12.00 2.10 14.10Nov-11 T Bates 54.00 9.45 63.45Nov-13 B Ho 66.00 11.55 77.55Nov-18 D Cope 32.00 5.60 37.60Nov-23 M Saka & Sons 20.00 3.50 23.50Nov-30 F Chan 320.00 56.00 376.00

856.00 149.80 1005.80

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Sales Ledger

Dr T Bates Account Cr

Nov-02 Sales 218.55Nov-11 Sales 63.45

Dr D Cope Account CrNov-03 Sales 195.05Nov-18 Sales 37.60

Dr F Chan Account CrNov-09 Sales 14.10Nov-30 Sales 376.00

Dr B Mo Account CrNov-13 Sales 77.55

Dr M Saka & Sons Account CrNov-23 Sales 23.50

General Ledger

Dr Sales Account CrNov-30 Credit sales for the month 856.00

Dr VAT Account Cr

Nov-30 Sales day book: VAT 149.80

8.4X Sales Day Book Date Details Folio Goods VAT Total2011Jul 1 Hall Products 520.00 91.00 611.00Jul 5 Ash & Co 62.00 10.85 72.85Jul 8 K. Meakin 18.00 3.15 21.15Jul 14 A. Ballearic 110.00 19.25 129.25Jul 19 Hall Products 880.00 154.00 1,034.00Jul 26 G. Huang 126.00 22.05 148.05Jul 28 A. Ballearic 42.00 7.35 49.35Jul 31 J. Stead 98.00 17.15 115.15

1,856.00 324.80 2,180.80

Sales Ledger

Dr Hall Products Account Cr

Jul 1 Sales 611.00Jul 19 Sales 1,034.00

Dr Ash & Co Account CrJul 5 Sales 72.85Dr K. Meakin Account CrJul 8 Sales 21.15Dr A. Ballearic Account CrJul 14 Sales 129.25Jul 28 Sales 49.35

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Dr G. Huang Account CrJul 26 Sales 148.05

Dr J Stead Account CrJul 31 Sales 115.15

General Ledger

Dr Sales Account CrJul 31 Credit sales for the month 1,856.00

Dr VAT Account Cr

Jul 31 Sales day book : VAT 324.80

8.5 It is important to check sales invoices prior to sending them out to customers for the following reasons:

To ensure the customers order number or reference is shown.To check that the correct quantity of goods has been invoiced.To ensure the goods/services are invoiced at the right place.To check all the calculations and extensions.

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9.1 White Bros

Purchases Day Book

Date Details Goods VAT Total

2010

May-01 Bould & Co 104.00 18.20 122.20

May-07 Harlow & Brown 48.00 8.40 56.40

May-16 J Adams Ltd 234.00 40.95 274.95

May-23 Bould & Co 170.00 29.75 199.75

May-26 J H Products 320.00 56.00 376.00

May-28 Harlow & Brown 62.00 10.85 72.85

May-31 P Yeung Ltd 446.00 78.05 524.05

1384.00 242.20 1626.20

Purchase Ledger

Dr Bould & Co Account Cr

May-01 Purchases 122.20


Dr Harlow and Brown Account Cr



Dr J Adam Ltd Account Cr


Dr J H Products Account Cr


Dr P Yeung Account Cr


General Ledger

Dr Purchases Account Cr

May-31 Credit purchases for the month

1384.00

Dr VAT Account Cr

May-31 Purchases Day Book : VAT

242.20

Chapter 9: Purchases day book and purchase ledger including VAT

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9.2 Bakers Electrical Co

Purchases Day Book


2010

Jul-03 Peak Electrical 722.00 126.35 848.35

Jul-08 Leigh Electrics 84.00 14.70 98.70

Jul-12 Thomas Motors 274.00 47.95 321.95

Jul-17 Naik & Sons 160.00 28.00 188.00

Jul-21 Peak Electrical 158.00 27.65 185.65

Jul-23 W D Services 46.00 8.05 54.05

Jul-25 Leighs Electrics 210.00 36.75 246.75

Jul-30 Naik & Sons 178.00 31.15 209.15

1832.00 320.60 2152.60

Purchases Ledger

Dr Peak Electrical Ltd Account Cr

Jul-03 Purchases 848.35


Dr Leigh Electrics Account Cr



Dr Thomas Motors Account Cr


Dr Naik & Sons Account Cr



Dr W D Services Account Cr


General Ledger


Jul-31 Credit purchases for the month

1832.00

Dr VAT Account Cr

Jul-31 Purchases Day Book : VAT

320.60

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9.3X Tasty Foods

Purchases Day Book


2010

Aug 1 Barker Foods Ltd 62.00 10.85 72.85

Aug 6 Fern Bros 48.00 8.40 56.40

Aug 10 Ash Catering Co 224.00 39.20 263.20

Aug 14 Barker Foods Ltd 136.00 23.80 159.80

Aug 22 Farm Produce 98.00 17.15 115.15

Aug 27 Fern Bros 166.00 29.05 195.05

Aug 29 Leigh & Sons 84.00 14.70 98.70

Aug 30 Ash Catering Co 366.00 64.05 430.05

1,184.00 207.20 1,391.20

Purchases Ledger

Dr Barker Foods Ltd Account Cr

Aug 1 Purchases 72.85


Dr Fern Bros Account Cr



Dr Ash Catering Co Account Cr



Dr Farm Products Account Cr


Dr Leigh & Sons Account Cr


General Ledger


Aug 31 Credit purchases for the month

1,184.00

Dr VAT Account Cr

Aug 31 Purchases Day Book : VAT

207.20

9.4X It is important to check invoices prior to payment to ensure:The goods invoices match the order specificationThe goods have been receivedThey have been charged correctlyThe calculations are accurateThe invoice has been passed for payment

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Chapter 10: Sales returns day book and purchase returns day book

10.1

Sales Day Book (Page 7)

Date2010

DetailsGoods

VAT

Total

Jun-01 J Alcock 180.00 31.50 211.50

Jun-01 P Twigg 60.00 10.50 70.50

Jun-09 Bell Products 140.00 24.50 164.50

Jun-09 Travis Ltd 330.00 57.75 387.75

Jun-23 B Seddon 780.00 136.50 916.50

Jun-30 P Twigg 440.00 77.00 517.001930.00 337.75 2267.75

Sales Returns Day Book


2010

Jun-12 J Alcock 12.00 2.10 14.10

Jun-28 Travis Ltd 50.00 8.75 58.7562.00 10.85 72.85

Sales Ledger

Dr J Alcock Account Cr

Jun-01 Sales 211.50 Jun-12 Sales returns 14.10

Dr P Twigg Account Cr

Jun-01 Sales 70.50517.00Jun-30 Sales

Dr Bell Products Account Cr

Jun-09 Sales 164.50

Dr Travis Ltd Account Cr

Jun-09 Sales 387.75 Jun-28 Sales returns 58.75

Dr B Seddon Account Cr

Jun-23 Sales 916.50

General Ledger

Dr Sales Account Cr

Jun-30 Total SDB 1930.00

Dr Sales Returns Account Cr

Jun-30 Total SRDB 62.00

Dr VAT Account Cr

Jun-30 Total SRDB 10.85 Jun-30 Total SDB 337.75

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Purchases Day Book


2010

May-01 J Yau Ltd 120.00 21.00 141.00

May-05 S Wager 80.00 14.00 94.00

May-05 Ash Bros 220.00 38.50 258.50

May-14 J Yau Ltd 60.00 10.50 70.50

May-19 D Wong 300.00 52.50 352.50

May-19 Rughani & Co 280.00 49.00 329.00

May-19 Ash Bros 80.00 14.00 94.00

May-31 A Davies 56.00 9.80 65.80

May-31 Rughani & Co 172.00 30.10 202.101368.00 239.40 1607.40

Purchase Returns Day Book


2010

May-09 J Yau Ltd 30.00 5.25 35.25

May-27 D Wong 42.00 7.35 49.3572.00 12.60 84.60

Purchase Ledger

Dr J Yau Ltd Account Cr

May-09 Purchase returns 35.25 May-01 Purchases 141.00


Dr S Wager Account Cr


Dr Ash Bros. Account Cr



Dr D Wong Account Cr

May-27 Purchase returns 49.35 May-19 Purchases 352.50

Dr Rughani & Co Account Cr



Dr A Davies Account Cr


General Ledger


May-31 Total PDB 1368.00

Dr Purchase Returns Account Cr

May-31 Total PRDB 72.00

Dr VAT Account Cr

May-31 Total PDB 239.40 May-31 Total PRDB 12.60

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10.3X Anderson's Ltd (b)

Purchases Day Book

Date Details Goods VAT Total2010Jan 2 Naylor's Ltd 1,300.00 227.50 1,527.50Jan 5 Roberts & Sons 668.00 116.90 784.90Jan 19 R. James & Co 1,512.00 264.60 1,776.60

3,480.00 609.00 4,089.00

Purchase Returns Day Book

Date Details Goods VAT Total2010Jan 13 Naylor's Ltd 84.00 14.70 98.70Jan 30 R. James & Co 400.00 70.00 470.00

484.00 84.70 568.70

Sales Day Book

Date Details Goods VAT Total2010Jan 12 Marlow (Fancy

Gifts)656.00 114.80 770.80

Jan 26 J. Jeynes 2,468.00 431.90 2,899.90Jan 26 Birch Bros 340.00 59.50 399.50Jan 28 F & J Shah 5,000.00 875.00 5,875.00Jan 28 Marlow (Fancy

Gifts)380.00 66.50 446.50

8,844.00 1,547.70 10,391.70

Sales Returns Day Book

Date Details Goods VAT Total2010

Jan 30Marlow (Fancy Gifts)

60.00 10.50 70.50

60.00 10.50 70.50

10.3X (a) (c) (e)

Sales Ledger

J. Jeynes Account

Jan-01 Balance b/d 1,490.00 Jan-31 Balance c/d 4,389.90

Jan-26 Sales 2,899.90

4,389.90 4,389.90

Feb-01 Balance b/d 4,389.90

Marlow (Fancy Goods) Account

Jan-01 Balance b/d 552.00 Jan-30 Sales Returns 70.50

Jan-12 Sales 770.80 Jan-31 Balance c/d 1,698.80

Jan-28 Sales 446.50

1,769.30 1,769.30


F & J Shah Account

Jan-01 Balance b/d 780.00 Jan-31 Balance c/d 6,655.00

Jan-28 Sales 5,875.00

6,655.00 6,655.00


Birch Bros Ltd Account

Jan-26 Sales 399.50

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10.3X (a) (c) (e)

Purchase Ledger

R. James & Co. Account

Jan-30 Purchase Returns 470.00 Jan-01 Balance b/d 1,600.00

Jan-31 Balance c/d 2,906.60 Jan-19 Purchases 1,776.60

3,376.60 3,376.60


Naylor's Ltd Account

Jan-13 Purchase Returns 98.70 Jan-01 Balance b/d 900.00

Jan-31 Balance c/d 2,328.80 Jan-02 Purchases 1,527.50

2,427.50 2,427.50


Roberts & Sons Account

Jan-31 Balance c/d 1,274.90 Jan-01 Balance b/d 490.00

Jan-05 Purchases 784.90

1,274.90 1,274.90


10.3X (d)

General Ledger

Dr Sales Account Cr

Jan-31 Total Sales for January

8,844.00

Dr Sales Returns Account Cr

Jan-31 Total SRDB 60.00

Purchases Account

Jan-31 Total Purchases for January

3,480.00

Purchases Return Account

Jan-31 Total PRDB 484.00

Dr VAT Account Cr

Jan-31 Total PDB 609.00 Jan-31 Total PRDB 84.70Jan-31 Total SRDB 10.50 Jan-31 Total SDB 1,547.70Jan-31 Balance c/d 1,012.90

1,632.40 1,632.40

*Feb-01 Balance b/d 1,012.90

* The balance on the VAT account shows that Anderson's Ltd owe 1,012.90 to HMRC

10.4 Perris Design Company Reconciliation of ledger accounts with supplier's statements (a) Bennetts Ltd as at 31 July 2010 Balance per our Purchase Ledger 760.28 Add Purchases not received by us 121.50 Add Returns not received by supplier 63.50 Balance per Supplier's Statement 945.28

(b) Kirkhams Products Ltd as at 31 July 2010 Balance per our Purchase Ledger 1,387.68 Add Purchases not received by us 68.42 Add Returns not received by supplier 54.62 Balance per Supplier's Statement 1,510.72

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11.1

Cash Book

Cash Bank Cash Bank

(1) Capital 4,000 (2) Fixtures 660

(4) Sales 225 (4) Rent 140

(6) T Thomas 188 (12) Wages 275

(8) Sales 308 (15) Cash 200

(10) J King 300 (20) Stationery 60

(14)J Walters (Loan)

500 (22) J French 166

(15) Bank 200 (28) Drawings 100

(30) J Scott 277 (31) Balances c/d 216 4,247

(31) Sales 66

791 5,273 791 5,273

(1) Balances b/d 216 4,247

11.2X

Dr Cash Book Cr

2010 Cash Bank 2010 Cash Bank

Feb 1 Balance b/d 76.32 2,376.50 Feb 2 Electricity 156.00

Feb 6 D Hill 300.00 Feb 4 Motor expenses

15.00

Feb 6 A Jackson 275.00 Feb 7 Stationery 3.70

Feb 6 H Wardle 93.20 Feb 12 Palmer & Sons - purchases

723.50

Feb 10 Sales 57.10

Feb 14 D Whitman - loan

500.00 Feb 16 Wright Brothers

86.20

Feb 22 J Smith 217.00 Feb 17 Drawings 50.00

Feb 26 Sales 53.00 Feb 17 Post offi ce re:

Feb 28 Balance c/d 590.60 Telephone a/c 140.60

Mr S Jepson

Feb 23 Petrol 21.00

Feb 27 Brownsons of M/cr

899.00

Feb 28 Salaries 2,400.00

Feb 28 Balance c/d 43.72

133.42 4,405.30 133.42 4,405.30

Mar-01 Balances b/d 43.72 Mar-01 Balances b/d 590.60

Chapter 11: Cash books

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Cash Book

Disct Cash Bank Disct Cash Bank

(1) Capital 6,000 (1) Fixtures 950

(3) Sales 407 (2) Purchases 1,240

(5) N Morgan 10 210 (4) Rent 200

(9) S Cooper 20 380 (7) S Thompson 4 76

& Co

(14) L Curtis 115 (12) Rates 410

(20) P Exeter 2 78 (16) M Monroe 6 114

(31) Sales 88 (31) Calances c/d 93 4,195

32 407 6,871 10 407 6,871

General Ledger Discounts Allowed

(31) Cash Book 32

Discounts Received

(31) Cash Book 10

11.4X

DrM Pinero Cash Book

Cr

Disct Cash Bank Disct Cash Bank

(1) Balance b/d 58 (1) Balance b/d 1,470

(2) Capital 1,000 (3) Office fixtures

780

(4) Sales 220 (5) Bank 200

(5) Cash 200 (6) B Barnes 2 78

(8) Sales 500 (6) T Horton 6 234

(15) Bank 400 (6) T Jackin 10 390

(18) L Graham 4 76 (12) Motor Expenses

77

(18) B Crenshaw 7 133 (15) Cash 400

(18) H Green 11 209 (16) Drawings 120

(22) T Weiskopf 204 (20) Wages 210

(28) Cash 755 (26) Insurance 150

(30) Balance c/d 6,049 (28) Bank 755

(31) Motor Van 4,920

(31) Balance c/d 20

22 1,382 8,422 18 1,382 8,422

DrGeneral Ledger

Discounts Received AccountCr

(31) Cash Book 18

Dr Discounts Allowed Account Cr

(31) Cash Book 22

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12.1

Receipts

323334358363738

404142

39

Balance b/dCash Window cleanerPostage stampsPetrolStationeryJean Ford stampsOffice cleanerParcel postageMagazineComputer disksPetrolRefreshmentsOffice cleaner

Balance c/d

Balance b/d

Jun 012010

Jun 01Jun 01Jun 03Jun 04Jun 06Jun 10Jun 14Jun 16Jun 19Jun 21Jun 23Jun 27Jun 29

Jun 30

Jul 01

CashJul 01

18.52131.48

152.00

16.45

133.55

2.00

p

Date Details Total VAT Postage Cleaning MotorExpenses Expenses

Stationery SundryVoucher

Number

5.60

10.00

1.45

1.052.10

10.20

p

p

1.35

7.60

8.95

p

6.90

20.00

50.00

p

32.00

12.00

44.00

p

8.30

15.20

p

3.00

7.20

p

Amount required to restore imprest = Float required 150.00

Less Cash in hand 16.45

Amount required 133.55

10.007.60

37.609.75

20.00

3.00

14.10

20.00 20.00

16.45

135.55

152.00

1.35

7.95

4.20 4.20

Chapter 12: Petty cash and the imprest system

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Receipts

8081828384788586

8887

Balance Cash Envelopes and filesTea, Coffee and milkSpecial deliveryOffice cleanerCleaning materials M Lloyd StationeryPostage stampsTravel expensesFlowersPhotocopy paper

Balance

Balance

15 Oct2010

15 Oct16 Oct17 Oct18 Oct20 Oct20 Oct23 Oct23 Oct25 Oct27 Oct28 Oct

31 Oct

01 Nov

Cash01 Nov

23.4076.60

103.50

13.80

86.20

3.50

Date Details Total VAT Postage Cleaning TravelExpenses Expenses

Stationery SundryVoucher

1.66

0.63

0.741.40

4.43

7.00

8.60

3.60

15.60

8.00

20.00

23.60

16.42

16.42

10.00

18.00

7.40

11.65

Amount required to restore the imprest = Float required 100.00

Less Cash in hand 13.80

Amount required 86.20

11.667.408.60

20.004.23

16.42

9.40

13.80

89.70

103.50

7.00

4.99 4.25

b/d

c/d

b/d

Singh's Estate Agents - Petty Cash book12.2X

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Note: Both in theory and in practice you can start with the cash book balance working to the bank statement balance, or you can reverse this method. Many teachers and lecturers have their preferences, but this is a personal matter only. Examiners sometimes ask for them using one way, sometimes the other. Students should therefore be able to tackle them both ways.

13.1

(a)

Cash Book

2010 (Totals so far) 2,328 2010 (Totals so far) 497

Dec-31 J Walters 54 Dec-31 Bank charges 22

Dec-31 Balance c/d 1,863

2,382 2,382

(b)

Bank Reconciliation Statement as at 31 December 2010

Balance per cash book 1,863

Add Unpresented cheque 115

1,978

Less Bankings not yet on bank statement (249 1 178) 427

Balance per bank statement 1,551

OR

Bank Reconciliation Statement as at 31 December 2010


Add Bankings not yer on bank statement (249 1 178) 427

1,978

Less Unpresented cheque 115


13.2X

(a)

DrPreston & Co

Cash BookCr

Dec 31 Balance b/d 9,155 Dec 31 Bank charges 110

Dec 31 BGC: P Todd 270 Dec 31 Balance c/d 9,315

9,425 9,425

Jan 1 Balance b/d 9,315

Chapter 13: Bank reconciliation statements

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(b)

Preston & Co Bank Reconciliation Statement as at 31 December 2010

Balance as per cash book 9,315


9,890

Less Bankings not yet on bank statement ( 945 1 300 1 890) 2,135


OR

Preston & Co Bank Reconciliation Statement as at 31 December 2010

Balance as per bank statement 7,755

Add Bankings not yet on bank statement ( 945 1 300 1 890) 2,135

9,890



13.3

(a)

Cash Book - James Baxter

2010 2010

Mar-31 BGC - A May 929 Mar-31 Balance b/d 2,804

Mar-31 Balance c/d 2,003 Mar-31 Standing order - Oak plc

100

Mar-31 Bank charges 28

2,932 2,932

(b)

James Baxter Bank Reconciliation Statement as at 31 March 2010

Bank overdraft per cash book 2,003

Add Banking not entered on bank statement 160

2,163


Bank overdraft per bank statement 1,673

OR

James Baxter Bank Reconciliation Statement as at 31 March 2010

Balance per bank statement 1,673 O/D

Less Banking not entered on bank statement 160

1,513 O/D


Balance per cash book 2,003 O/D

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13.4X

(a)

E Flynn Cash Book

2010 2010

Dec-06 J Hallworth 155 Dec-01 Balance b/d 3,872

Dec-20 C Walters 189 Dec-10 P Wood 206

Dec-31 P Miller 211 Dec-19 M Roberts 315

Dec-31 K Saunders 180 Dec-29 P Phillips 84

Dec-31 Balance c/d 4,007 Dec-30 s/o Mercantile 200

Dec-31 Bank charges 65

4,742 4,742

(b)

E Flynn Bank Reconciliation Statement as at 31 December 2010

Bank overdraft per cash book 4,007

Add Bank lodgements not yet entered on bank statement 211

4,218


Bank overdraft per bank statement 4,134

13.5

(a) A cheque that the bank refuses to pay due to insufficent funds in the debtor's account.

(b) Date Narrative Date Narrative Apr-01 Balance b/d 8,000 Apr-02 F Bashir (10123) 1,200

Apr-07 Sales banked 800 Apr-08 M Tyler (10124) 1,300

Apr-13 Sales banked 550 Apr-15 H Joshi (10125) 1,250

Apr-20 Sales banked 650 Apr-15 DD / MTC 250

Apr-30 Sales banked 750 Apr-20 DD / Pre. Ins 80

Apr-22 CT - M Bell 1,230 Apr-28 Bank charges 120

Apr-30 Dishonoured cheque 280

Apr-30 Balance c/d 7,500

11,980 11,980

May-01 Balance b/d 7,500

(c)

Real Kitchen Suppliers Bank Reconciliation Statement as at 30 April 2010

Balance as per cash book 7,500

Add: Unpresented cheque - 10125 1,250

8,750

Less: cash not yet credited 750


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The Journal

Date Details Dr Cr

2010

Jan-01 Computer Equipment 4,000

Data Systems Ltd 4,000

Jan-05 Drawings 120

Purchases 120

Jan-08 Bad debts 220

J Oddy 220

Jan-15 Motor vehicle 15,500

Bank 15,500

Jan-29 Offi ce furniture and fi ttings 250

J Street 250

14.2X

(a) Fixtures Dr 1,809 J Harper Cr 1,809

(b) Drawings Dr 500 Purchases Cr 500

(c) Drawings Dr 100 Cash Cr 100

(d) Offi ce equipment

Dr 500 K Lamb Cr 500

(e) J Harper Dr 65 Fixtures Cr 65

(f) Bad debts Dr 68 J Brown Cr 68

(g) Offi ce equipment

Dr 2,190 Super Offi ces Cr 2,190

14.3

(a) J Harkness Dr 678 J Harker Cr 678

(b) Machinery Dr 4,390 L Pearson Cr 4,390

(c) Motor Van Dr 10,800 Motor expenses Cr 10,800

(d) E Fletcher Dr 9 Sales Cr 9

(e) Sales Dr 257 Commissions received

Cr 257

14.4X

(a) H Weld Dr 699 K Webb Cr 699

(b) Cash Dr 189 Bank Cr 189

(c) B Maxim Dr 443 B Gunn Cr 443

(d) K Innes Dr 10 Purchases Cr 10

(e) H Mersey* Dr 178 Cash Cr 178

*Needs double the amount to fi rst cancel out the error and then replace it with the correct amount.

Chapter 14: The journal

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(a)

Journal

Dr Cr

Sep 30 Drawings 750

Purchases 750

Bring correction of error of omission

Sep 30 L Patel 500

A Patek 500

Being correction of your error of commission

(b)

Dr Suspense Account Cr

Sep 30 Balance b/d 340 Sep 30 Sales 240

Sep 30 Farmer & Co 170 Sep 30 Pointer Bros 270

510 510

(c) Before discovery of the errors in the Trial Balance the debit side was deficient by 340.

(d) The trial balance has its limitations since certain errors can occur and not be revealed, such as:-

Error of omission Error of commission Error of principle Error of original entry Compensating errors Complete reversal of entries

One from the above list.

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15.1

Dr Sales Ledger Control Account Cr

2010 2010

Oct-01 Balance b/d 12,340 Oct-31 SRDB 2,847

Oct-31 SDB 124,790 Oct-31 Bank & cash 116,225

Oct-31 Discount allowed 3,638

Oct-31 Balance c/d 14,420

137,130 137,130

Nov-01 Balance b/d 14,420

15.2X


2010 2010

Feb 1 Balance b/d 33,950 Feb 28 Bank & cash 332,920

Feb 28 SDB 347,480 Feb 28 Discount allowed 4,497

Feb 28 Bank : dishonouredcheques

791 Feb 28 SRDB 11,095

Feb 28 Bad Debts 977

Feb 28 Purchase ledger set offs

1,400

Feb 28 Balance c/d 31,332

382,221 382,221

Mar 1 Balance b/d 31,332

15.3

Dr Purchase Ledger Control Account Cr

2010 2010

Jul-31 PRDB 1,575 Jul-01 Balance b/d 19,450

Jul-31 Bank 26,150 Jul-31 PDB 28,200

Jul-31 Discount received 550

Jul-31 Balance c/d 19,375

47,650 47,650

Aug-01 Balance b/d 19,375

Chapter 15: Sales ledger and purchase ledger control accounts

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15.4X

Dr Purchase Ledger Control Account Cr

2010 2010

Jan 31 PRDB 2,835 Jan 31 Balance b/d 35,010

Jan 31 Bank 45,070 Jan 31 PDB 50,760

Jan 31 Discount received 990

Jan 31 Sales ledger set offs 2,000

Jan 31 Balance c/d 34,875

85,770 85,770

Feb 1 Balance b/d 34,875

15.5X

(a)


2009 2009

Jan 1 Balance b/d 65,000 Dec 31 RIDB 6,430

Dec 31 SDB 453,900 Dec 31 Bank 432,000

Dec 31 Returned cheque 750 Dec 31 Discount All 7,540

Dec 31 Bad Debts 650

Dec 31 Purchase ledger set offs

1,650

Dec 31 Balance c/d 71,380

519,650 519,650

(b) Ravi believes there may be errors in his sales ledger because the sales ledger shows 78.540 total debtors at the end of December 2009. Having constructed the control account the total debtors outstanding amounts to 71,380. Therefore there is a discrepancy of 78,540 71,380 7,160 which will require investigation.

(c) The closing balance of the sales ledger control account would appear under current assets in the balance sheet.

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16.1 Lucy ChanTrading and Profi t and Loss Account for the year ending 31 December 2010

Sales 133,770Less cost of goods sold

Purchases 84,665Less closing stock 15,085 69,580

Gross Profit 64,190Less Expenses

Rent 4,595Wages and salaries 28,865Printing and stationery 2,940Electricity expenses 2,485General expenses 1,295 40,180

Net Profit 24,010

16.2X Charles DrewTrading and Profi t and Loss Account for the year ending 31 December 2010

Sales 128,452Less cost of goods sold



Wages 11,229

Rent 5,330

Offi ce expenses 1,620

Motor expenses 922

Electricity expenses 1,350 20,451

Net Profit 29,949

Chapter 16: Trading account and profi t and loss account of a sole trader

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16.3 G SinghTrading and Profi t and Loss Account for the year ended 31 December 2010

Sales 73,848Less Cost of goods sold:

Purchases 58,516Less Closing stock 10,192 48,324


Wages 8,600Motor expenses 2,080Rates 2,680Insurance 444General expenses 420 14,224

Net Profit 11,300

16.4X R CairnsTrading and Profi t and Loss Account for the year ended 30 June 2010

Sales 99,082Less Cost of goods sold



Wages 9,492Rates 2,000Printing and Stationery 562Electricity 1,266Insurance 605Sundry Expenses 1,518Motor expenses 3,109 18,552

Net Profit 20,619

16.5X

J LeungTrading and Profit and Loss Account for the year ended 31 March 2010

Sales 153,080Less Cost of goods sold



Rent and rates 6,708Insurance 1,312Electricity expenses 2,219Motor expenses 2,429Salaries and wages 26,855General expenses 3,466 42,989

Net Profit 19,748

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17.1 G SinghBalance Sheet as at 31 December 2010

Fixed AssetsBuildings 20,000 20,000

Motor vehicle 12,000 12,000

32,000 32,000

Current AssetsStock 10,192

Debtors 7,800

Cash at bank 6,616

Cash in hand 160 24,768

Less Current LiabilitiesCreditors 6,418 6,418

Net current assets 18,350

50,350Financed byCash introduced 48,000

Add Net profi t for the year 11,300

59,300

Less Drawings 8,950

50,350

17.2X R CairnsBalance Sheet as at 30 June 2010

Fixed assets

Premises 145,000 - 145,000

Computer equipment 8,000 - 8,000

Motor vehicle 16,500 - 16,500

169,500 - 169,500

Current assets

Stock 11,498

Debtors 9,498

Cash at bank 6,541

Cash in hand - 27,537

Less Current liabilities

Creditors 3,618 3,618


193,419

Financed by:

Capital introduced 185,000

Add Net profi t for the year 20,619

205,619

Less Drawings 12,200

193,419

Chapter 17: The Balance Sheet

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17.3 J LeungBalance Sheet as at 31 March 2010

Fixed Assets

Buildings 120,400 120,400

Equipment 17,028 17,028

Motor van 15,050 15,050

152,478 152,478

Current Assets

Stock 42,828

Debtors 29,283

Cash at bank 4,876 76,987

Less Current Liabilities

Creditors 13,975 13,975

Working Capital 63,012

215,490

Financed by Capital 212,736

Net profi t 19,748

232,484


215,490

17.4X Sarah JoshiTrading and Pro t and Loss Account for the

year ended 31 May 2010

Sales 103,658

Less Cost of goods sold

Purchases 85,691

Less closing stock 14,998 70,693

Gross Profit 32,965

Less Expenses

Rent 3,000



Printing and stationery 605

Wages and salaries 12,465


Insurance 578 22,262

Net Profit 10,703

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Balance Sheet as at 31 May 2010

Fixed Assets

Buildings 180,000 - 180,000

Computer equipment 3,600 - 3,600

Motor vehicle 19,800 - 19,800

203,400 - 203,400

Current Assets

Stock 14,998

Debtors 11,398

Cash at bank 13,850 40,246


Creditors 4,343 4,343

Net current assets / working capital 35,903

-

Less Long-term liabilities 239,303

Financed By:

Capital 237,240

Add Net profit 10,703

247,943

Less Drawings 8,640

239,303

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18.1 K JepsonTrading account for the year ended 31-Dec-10

Sales 69,736

Less cost of goods sold

Opening stock 12,463

Add purchases 47,536

Add carriage inwards 1,206

61,205

Less closing stock 13,480 47,725

Gross profit 22,011

18.2X Jane LiTrading and Profi t and Loss Account for the year ended 31 March 2010

Sales 98,280

Less Cost of Goods SoldOpening Stock 29,686

Add Purchases 66,429

Add Carriage Inwards 2,020

98,135

Less Closing Stock 33,307 64,828

Gross profit 33,452

Chapter 18: Financial statements: other considerations

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18.3 J MannTrading and Profit and Loss Account for the year ended 31 July 2010

Sales 110,859

Less sales returns 1,029

109,830





80,619

Less purchase returns 1,176

79,443

Less Closing stock 8,883 70,560

Gross Profit 39,270

Less Expenses

Salaries and wages 10,521

Rent 3,066

Motor Expenses 6,552


Carriage outwards 1,659 22,680

Net Profit 16,590

18.4X Emily HartTrading and Profit and Loss Account for the year ended 31 December 2010

Sales 189,050


186,200

Less Cost of Goods SoldOpening Stock 34,732


Add Carriage Inwards 400

157,815

Less Purchase Returns 3,000

154,815

Less Closing Stock 32,984 121,831

Gross Profit 64,369

Less Expenses

Wages 21,875



Carriage outwards 931

Printing and stationery 525 26,815

Net Profit 37,554

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S ShahTrading and Profit and Loss Account for the year ended 30 June 2010

Sales 178,560


176,592





139,699

Less purchase returns 3,091

136,608


Gross Profit 68,304

Less Expenses



Insurance 749

Motor Expenses 4,250

Telephone and internet 4,198

Electricity 1,594

Carriage outwards 1,920

General expenses 3,014 55,718

Net Profit 12,586

Balance Sheet as at 30 June 2010

Fixed Assets

Buildings 80,000 80,000

Computer equipment 3,360 3,360

Motor vehicles 17,280 17,280

100,640 100,640

Current Assets

Stock 28,320

Debtors 37,402

Cash at bank 4,627 70,349


Creditors 32,618 32,618

Net Current Assets (Working Capital) 37,731

138,371

Less long-term liabilities

Long-term loans Nil

138,371

Financed by

Capital account

Balance b/f 137,305

Add net profit for the year 12,586

149,891


138,371

18.5

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18.6X J CollinsTrading and Profit and Loss Account for the year ended 31 March 2010

Sales 74,400

Less Cost of sales



Carriage inwards 936

62,264


Gross Profit 32,128

Less Expenses


Carriage outwards 1,304

Rent 1,824

Rates 1,080

Printing and stationery 810

Travel expenses 490

Telephone 756

Sundry expenses 2,808 20,860

Net Profit 11,268

Balance Sheet as at 31 March 2010

Fixed Assets

Fixtures and fittings 2,400 2,400

Computer equipment 9,600 9,600

12,000 12,000

Current Assets

Stock 19,992

Debtors 18,308

Cash at bank 15,504

Cash in hand 480 54,284


Creditors 12,180 12,180

Net Current assets 42,104

54,104

Financed by:

Capital 51,376

Add net profit 11,268

62,644

Less Drawings 8,540

54,104

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19.1

J Chen

(a) Straight Line (b) Reducing Balance

Cost 6,000 6,000

Year 1 Depreciation* 1,250 Year 1 Depreciation 40% 3 6,000

2,400

4,750 3,600

Year 2 Depreciation 1,250 Year 2 Depreciation 40% 3 3,600

1,440

3,500 2,160


864

2,250 1,296


519

1,000 777

*Depreciation 5 6,000 2 1, 000 _____________ 4 5 1,250

19.2

Machine


Cost 75,000 75,000

Year 1 Depreciation* 11,070 Year 1 Depreciation 20% 3 75,000

15,000

63,930 60,000


12,000

52,860 48,000


9,600

41,790 38,400


7,680

30,720 30,720

*Depreciation 5 75,000 2 30,720 _______________ 4 5 11,070

Chapter 19: The concept of depreciation of xed assets

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19.3X

(a)

Reducing Balance

Cost 19,200

Year 1 Depreciation 50% of 19,200 9,600

9,600


4,800


2,400


1,200

(b)

Straight Line

Cost 19,200

Year 1 Depreciation 4,500

14,700


10,200


5,700


1,200

19,200 2 1,200 5 18,000 4 4 5 4,500

19.4X

Computer Equipment


Cost 4,600 Cost 4,600

Year 1 Depreciation * 1,000 Year 1 Depreciation 25% 3 4,600

1,150

3,600 3,450


862

2,600 2,588


647

1,600 1,941


485

600 1,456

* Depreciation 5 4,600 2 600 5 1,000

___________________________________ 4

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19.5X

(a)

Reducing Balance

Cost 72,900

Year 1 Depreciation 33 1 __ 3 % of 72,900 24,300

48,600


32,400


21,600


14,400


9,600

(b)

Straight Line

Cost 72,900


60,240


47,580


34,920


22,260


9,600

72,900 2 9,600 5 63,300 4 5 5 12,660

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19.6

Dumper

(a) Reducing Balance (b) Straight Line

Cost 18,000 18,000

Year 1 Depreciation 40% 3 18,000 7,200


10,800 13,000



6,480 8,000



3,888 3,000

Depreciation 5 18,000 2 3,000 ______________ 3 5 5,000

19.7X

(a) Machinery has straight line depreciation; fixtures has reducing balance.

(b) Machinery: 4,800 2 1,600 2 1,600 5 1,600 Fixtures: 2,025 2 506 2 380 5 1,139

(c) Machinery: 8,000 2 2,000 2 1,500 2 1,125 2 844 5 2,531 (Depreciation rate is 25% p.a.)

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20.1

(a)

Dr Motor Car Account Cr

2001

Jan-01 Bank 12,500

(b)

Dr Provision for Depreciation - Motor Car Account Cr

2001 2001

Dec-31 Balance c/d 2,500 Dec-31 Profi t and loss a/c 2,500

2002 2002

Dec-31 Balance c/d 4,500 Jan-01 Balance b/d 2,500

Dec-31 Profi t and loss a/c 2,000

4,500 4,500

2003 2003


Dec-31 Profi t and loss a/c 1,600

6,100 6,100

2004

Jan-01 Balance b/d 6,100

(c)

Profi t and Loss Account (extracts) for the year ended 31 December

2001 Depreciation 2,500



(d)

Balance Sheet (extracts) as at 31 December

Cost Total Depreciation Net book value

2001

Motor Car 12,500 2,500 10,000

2002

Motor Car 12,500 4,500 8,000

2003

Motor Car 12,500 6,100 6,400

Chapter 20: Double entry for depreciation and disposal of a fi xed asset

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20.2X

(a) Straight Line Method

Dr Machinery Account Cr

2001

Nov 01 Bank 18,000

Dr Provision for Depreciation - Machinery Account Cr

2002 2002

Oct 31 Balance c/d 1,800 Oct 31 Profit and loss a/c 1,800

Nov 1 Balance b/d 1,800

2003 2003


3,600 3,600


2004 2004


5,400 5,400


(b) Reducing Balance Method

Dr Machinery Account Cr

2001

Nov 01 Bank 18,000

Dr Provision for Depreciation - Machinery Account Cr

2002 2002



2003 2003


3,420 3,420


2004 2004


4,878 4,878


(c) Straight Line Method

Profit and Loss Account (extracts) for the year ended 31 October

2002 Depreciation - Machinery 1,800



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Balance Sheet (extracts) as at 31 October

Cost Total Depreciation Net Book Value

2002

Machinery 18,000 1,800 16,200

2003

Machinery 18,000 3,600 14,400

2004

Machinery 18,000 5,400 12,600

(d) Reducing Balance Method

Profit and Loss Account (extracts) for the year ended 31 October




Balance Sheet (extracts) as at 31 October

Cost Total Depreciation Net Book Value

2002

Machinery 18,000 1,800 16,200

2003

Machinery 18,000 3,420 14,580

2004

Machinery 18,000 4,878 13,122

20.3

(a)

Computer Equipment Account

2001 2004

Jan-01 Balance b/d 9,500 Jan-01 Computer equipment disposals 9,500

(b)

Provision for Depreciation : Computer Equipment Account

2001 2001

Dec-31 Balance c/d 1,900 Jan-01Computer equipment

1,900

2002 2002


Dec-31 Profit and loss 1,900

3,800 3,800

2003 2003


Dec-31 Profit and loss 1,900

5,700 5,700

2004 2004

Jan-01 Computer equipment disposals

5,700 Jan-01 Balance b/d 5,700

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(c)

Computer Equipment Disposals Account

2004 2004

Jan-01 Computer 9,500 Jan-01 Depreciaiton 5,700

Dec-31 Profit and loss 450 Jan-01 Bank 4,250

9,950 9,950

(d)

Profit and Loss Account (extracts) for the year ended 31 December

2001 Depreciation - Computer Equipment 1,900



(e)

Balance Sheet (extracts) as at 31 December

Cost Total Depreciation Net book value

2001

Computer Equipment 9,500 1,900 7,600

2002


2003


20.4X

(a)

Motor Van Disposals Account

Motor Van 12,000 Provision for depreciation 9,700

Bank 1,850

Profit and loss : loss on sale 450

12,000 12,000

(b)

Machinery Disposals Account

Machinery 27,900 Provision for depreciation 19,400

Profit and loss : profit on sale 2,770 Bank 11,270

30,670 30,670

(c)

Fixtures Disposals Account

Fixtures 8,420 Provision for depreciation 7,135

Bank 50

Profit and loss : loss on sale 1,235

8,420 8,420

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(d)

Buildings Disposals Account

Buildings 200,000 Provision for depreciation 110,000

Profit and loss : profit on sale 59,000 Bank 149,000

259,000 259,000

20.5

(a) Straight Line Method

Cost 2 Scrap Value

_________________ No. of Years

35,000 2 11,000 ______________ 4

6,000 per annum

(b)

Dr Provision for Depreciation - Vehicles Account Cr

2005 2005

Mar-31 Balance c/d 7,000 Mar-31 Profit and loss 7,000

Apr-01 Balance b/d 7,000

2006 2006

Mar-31 Balance c/d 12,600 Mar-31 Profit and loss 5,600

12,600 12,600

Apr-01 Balance b/d 12,600

WORKINGS

Year ended 31/03/05 20% 3 35,000 7,000 per annum

Year ended 31/03/06 20% 3 (35,000 2 7,000) 5,600 per annum

(c) Any two from: Wear and tear, obsolence, time factors, inadequacy, depletion.

20.6X

(a)

RIALTO TRADERS Plant and Machinery Account

2007 2007

May 1 Balance b/d 500,000 Dec 31 Plant and machinery disposals

200,000

2008

Apr 30 Balance c/d 300,000

500,000 500,000

2008

May 1 Balance b/d 300,000

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(b)

Motor Vehicles Account

2007


2008 2008

Feb 1 Bank 100,000 Apr 30 Balance c/d 300,000

300,000 300,000


(c)

Provision for Depreciation - Plant and Machinery Account

2007 2007

Dec 31 Plant and Machinery- Disposals

150,000 May 1 Balance b/d 200,000

2008 2008

Apr 30 Balance c/d 80,000 Apr 30 Profit and Loss 30,000

230,000 230,000


(d)

Plant and Machinery - Disposal Account

2007 2007

Dec 31 Plant and Machinery 200,000 Dec 31 Provision for Depreciation

150,000

Dec 31 Bank 40,000

Dec 31 Profit and Loss 10,000

200,000 200,000

(e) (i) Concept 1 Consistency Concept 2 Accruals

(ii) It is important to apply the consistency concept so that comparisons can be made between different years. Therefore in the above example depreciation is changed at 10% using the straight line method, the company needs to be consistent in using this method and the rate of depreciation in future final accounts. In applying the accruals concept the benefit that a fixed asset provides over its useful life is matched with the depreciation for the same period.

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21.1 Hart & Partners

(a) Dr Bad Debts Account Cr

2009 2009

May-16 S Bayley 550 Dec-31 Profi t & loss 1,240

Jul-31 J Carter 223

Nov-09 T Roche 467

1,240 1,240

Dr Provision For Doubtful Debts Account Cr

2009

Dec-31 Profi t & loss 520

(b) Profi t and Loss Account for the year ended 31 December 2009 (extracts)

Gross profi t

Less Expenses

Bad debts written off 1,240

Provision for doubtful debts 520 1,760

(c) Balance Sheet as at 31 December 2009 (extract)

Current Assets

Debtors 26,000

Less Provision for doubtful debts 520 25,480

21.2 Date

31-DecTotal debtors Profi t and

lossDr/Cr Final fi gure for

balance sheet

2007 7,000 70 Dr 6,930 (net)

2008 8,000 10 Dr 7,920 (net)

2009 6,000 20 Cr 5,940 (net)

2010 7,000 10 Dr 6,930 (net)

Chapter 21: Bad debts and provision for doubtful debts

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21.3X

Bad Debts

2007 2007

31 Dec Debtors 298 31 Dec Profit and loss a/c 298

2008 2008


2009 2009


2010 2010


Provision for Doubtful Debts

2007 2007

31 Dec Balance c/d 100 31 Dec Profit and loss a/c 100

2008 2008

31 Dec Balance c/d 130 1 Jan Balance b/d 100

31 Dec Profit and loss a/c 30

130 130

2009 2009

31 Dec Profit and loss a/c 15 1 Jan Balance b/d 130

31 Dec Balance c/d 115

130 130

2010 2010

31 Dec Balance c/d 150 1 Jan Balance b/d 115

31 Dec Profit and loss a/c 35

150 150

2011

1 Jan Balance b/d 150

Profit and Loss Accountsfor the years ended 31 December (extracts)

2007

Bad debts 298

Provision for doubtful debts 100

2008

Bad debts 386


2009 2009

Bad debts 344 Provision for doubtful debts 15

2010

Bad debts 477


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Balance Sheet as at 31 Decemeber (extracts)

2007 Debtors 12,000


2008 Debtors 15,000


2009 Debtors 14,000


2010 Debtors 18,000


21.4X (a)

The Journal

Date Debit Credit

Apr30 Bad Debts 500

A. Carter 500

Being bad debt written off

(b) Double entry for the creation of a Provision for Doubtful Debts Debit: Profit and Loss Account Credit: Provision for Doubtful Debts Account

(c) The prudence concept requires that the financial statements provide a true and fair view of the business at the date of the balance sheet. In addition profits should also reveal a correct and true figure. Therefore any anticipated losses need to be accounted for in the profit and loss account. Providing for a provision for doubtful debts anticipates any potential loss should a debtor fail to pay. By deducting the provision from the debtors in the balance sheet a more accurate figure of debtors is given.

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Answers

C HomerRent Account

2008 2008

Dec-31 Bank 1,600 Dec-31 Profi t and loss 2,000

Dec-31 Owing c/d 400

2,000 2,000

2009

Jan-01 Owing b/d 400

Insurance Account

2008 2008

Dec-31 Bank 900 Dec-31 Profi t and loss 635

Dec-31 Prepaid c/d 265

900 900

2009

Jan-01 Prepaid b/d 265


2008 2008

Dec-31 Bank 7,215 Dec-31 Profi t and loss 7,381


7,381 7,381

2009


Rates Account

2008 2008

Jan-01 Bank 750 Dec-31 Profi t and loss 1,500

Jul-01 Bank 1,125 Dec-31 Prepaid c/d 375

1,875 1,875

2009


Rents Receivable Account

2008 2008

Dec-31 Profi t and loss 4,800 Apr-15 Bank 2,000

Dec-31 In advance c/d 1,600 Dec-15 Bank 4,400

6,400 6,400

2009

Jan-01 In advance b/d 1,600

Chapter 22: Accruals, prepayments and other adjustments for fi nancial statements

22.1

(a)

(b)

(c)

(d)

(e)

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T NortonGeneral Expenses Account

2009 2009


Dec-31 Owing c/d 56

671 671

2010

Jan-01 Owing b/d 56

Telephone Account

2009 2009

Dec-31 Bank 980 Dec-31 Profi t and loss 1,097


1,097 1,097

2010


Commission Received Account

2009 2009

Dec-31 Profi t and loss 3,231 Dec-31 Bank 3,056


3,231 3,231

2010


Carriage Outwards Account

2009 2009



788 788

2010


Insurance Account

2009 2009

Jan-01 Bank 1,080 Dec-31 Profi t and loss 1,440

Oct-01 Bank 1,080 Dec-31 Prepaid c/d 720

2,160 2,160

2010


22.2

(a)

(b)

(c)

(d)

(e)

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T DaleStationery Account

2008 2009

01 Jul Stock b/d 290 30 Jun Profit and loss 800

2009 2009

30 Jun Cash and bank 855 30 Jun Stock c/d 345

1,145 1,145

General Expenses Account

2008

01 Jul Owing b/d 64

2009 2009

30 Jun Cash and bank 590 30 Jun Profit and loss 616

30 Jun Owing c/d 90

680 680

Rent and Rates Account

2008

01 Jul Owing b/d:

Rent 160

Rates 205

2009 2009

30 Jun Cash and bank 3,890 30 Jun Profit and loss 3,635

30 Jun Owing c/d 360 30 Jun Rent prepaid and c/d

250

4,250 4,250


2008

01 Jul Owing b/d 180

2009 2009

30 Jun Cash and bank 4,750 30 Jun Profit and loss 4,945

30 Jun Owing c/d 375

5,125 5,125

Commission Receivable Account

2008

01 Jul Owing b/d 80

2009 2009

30 Jun Profit and loss 915 30 Jun Cash and bank 850

30 Jun Owin c/d 145

995 995

22.3X

(a)

(b)

(c)

(d)

(e)

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C CainenTrading and Profit and Loss Account

for the year ended 31 December 2009

Sales 18,590


Opening stock 2,050


13,220

Less Closing stock 3,910

9,310

Gross Profit 9,280

Less Expenses

Rent (640 2 160) 480

Wages and salaries (2,140 1 290) 2,430

Insurance (590 2 190) 400

Bad debts 270

Telephone (300 1 110) 410

General Expenses 180 4,170

Net Profit 5,110

K TylerTrading and Profit and Loss Account for the year ended 31 December 2010

Sales 54,190

Less Sales returns 200 53,990


Opening stock 8,620


39,180


Gross Profit 26,930

Less Expenses



Rent and rates (1,200 2 160) 1,040

Discounts allowed 290

Lighting expenses (580 1 170) 750

Computer running expenses (1,210 2 140) 1,070


Depreciation : Motor vehicles 700 11,800

Net Profit 15,130

22.4

22.5

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J SearsTrading and Profit and Loss Account

for the year ended 31 December 2010

Sales 80,000

Less Sales returns 1,000

79,000

Less Cost of goods sold:



90,000

Less Purchase returns 1,240

88,760


Gross Profit 14,240

Less Expenses


Telephone (200 2 20) 180

Bad debts 40

Provision for doubtful debts (1,960 3 10% 2 160) 36

Depreciation:

Store fittings 800

Motor van 1,200 9,906

Net Profit 4,334

J SearsBalance Sheet as at 31 December 2010

Cost Depreciation Net Book

Value

Fixed Assets

Store fittings 8,000 800 7,200

Motor van 6,000 1,200 4,800

14,000 2,000 12,000

Current Assets

Stock 24,000

Debtors 1,960


Prepaid expenses 20

Bank 600

26,384


Creditors 1,400

Expenses owing 450 1,850


36,534

Financed by:

Capital

Balance 1.1.2010 35,800

Add Net profit 4,334

40,134

Less Drawings 3,600

36,534

22.6X

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Answers

Total Debtors

Balances b/d 2,760 Cash 14,610

Sales (difference) 14,940 Balances c/d 3,090

17,700 17,700

Total Cre

Documents

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