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2 a d v a n c e d b o o k k e e p i n g t u t o r z o n e

The accounting system1

1.1

FINANCIAL DOCUMENTS

BOOKS OF PRIME ENTRY

DOUBLE-ENTRY SYSTEM OF LEDGERS

TRIAL BALANCE

FINANCIAL STATEMENTS

Summaries of accounting information

Records the dual aspect of businesstransactions

Arithmetical checking of double-entrybookkeeping

Measurement of profit or loss, assets,liabilities and capital

Sources of accounting information

a n s w e r s t o c h a p t e r a c t i v i t i e s 3

1.2 • asset of bank increases by £10,000 asset of vehicles increases by £20,000 capital increases by £30,000 assets £30,000 – liabilities £0 = capital £30,000

• asset of office equipment increases by £5,000 asset of bank decreases by £5,000 assets £30,000 – liabilities £0 = capital £30,000

• asset of inventory increases by £3,000 asset of bank decreases by £3,000 assets £30,000 – liabilities £0 = capital £30,000

• asset of bank increases by £15,000 liability of bank loan increases by £15,000 assets £45,000 – liabilities £15,000 = capital £30,000

• asset of vehicles increases by £12,500 asset of bank decreases by £12,500 assets £45,000 – liabilities £15,000 = capital £30,000

• asset of inventory increases by £4,000 liability of trade payables increases by £4,000 assets £49,000 – liabilities £19,000 = capital £30,000

1.3

Assets Liabilities Capital

£ £ £

75,000 0 75,000

60,000 25,000 35,000

75,500 27,200 48,300

50,300 16,350 33,950

62,940 15,780 47,160

114,200 37,320 76,880


1.4 (a) - (b) Office equipment has been bought for £20,000, paid from the bank (b) - (c) Inventory has been bought for £5,000, paid from the bank (c) - (d) Inventory has been bought for £3,000, on credit from a supplier (d) - (e) £2,000 of inventory has been sold for £3,000 on credit to a customer (e) - (f) £3,000 has been paid to the trade payables from the bank


2.1 Debit Credit

(d) Trade receivables account Sales account

2.2 Debit Credit

(a) Sales returns account Tade receivables account

Double-entry bookkeeping2


2.3 CAROL PATTISON(a)

Dr Bank account Cr20-2 £ 20-2 £

1 May Capital 10,000 6 May Office equipment 5,00014 May L Edwards: loan 2,000 10 May Rent 50022 May Commission received 250 17 May Wages 750 25 May Drawings 400 27 May Office equipment 2,000 31 May Wages 800

(b)Dr Capital account Cr20-2 £ 20-2 £ 1 May Bank 10,000

Dr Office equipment account Cr20-2 £ 20-2 £

6 May Bank 5,00027 May Bank 2,000

Dr Rent account Cr20-2 £ 20-2 £10 May Bank 500

Dr Lucy Edwards: loan account Cr20-2 £ 20-2 £

14 May Bank 2,000

Dr Wages account Cr20-2 £ 20-2 £17 May Bank 75031 May Bank 800

Dr Commission received account Cr20-2 £ 20-2 £

22 May Bank 250

Dr Drawings account Cr20-2 £ 20-2 £25 May Bank 400


2.4

Transaction Account debited Account credited

(a) bank sales

(b) rent bank

(c) purchases Wyvern Warehouse

(d) Severn Systems sales

(e) Wyvern Warehouse purchases returns (returns out)

(f) sales returns (returns in) Severn Systems

(g) drawings bank

(h) wages bank


2.5 PAXTON PRODUCTSDr Purchases account Cr

20-9 £ 20-9 £2 Aug Avon Limited 1,000

12 Aug Bank 450

Dr Avon Limited Cr20-9 £ 20-9 £

8 Aug Bank 1,000 2 Aug Purchases 1,000

Dr Sales account Cr20-9 £ 20-9 £ 4 Aug Bank 500 5 Aug Cash 300 24 Aug Barbourne Ltd 570

Dr Bank account Cr20-9 £ 20-9 £4 Aug Sales 500 8 Aug Avon Limited 1,0007 Aug Bank loan 2,000 12 Aug Purchases 45030 Aug Barbourne Ltd 560 15 Aug Rent 500 26 Aug Leam Ltd 220

Dr Cash account Cr20-9 £ 20-9 £

5 Aug Sales 300 9 Aug Wages 200

Dr Bank: loan account Cr20-9 £ 20-9 £ 7 Aug Bank 2,000

Dr Wages account Cr20-9 £ 20-9 £

9 Aug Cash 200

Dr Rent account Cr20-9 £ 20-9 £15 Aug Bank 500

Dr Stationery account Cr20-9 £ 20-9 £17 Aug Leam Ltd 225

Dr Leam Limited Cr20-9 £ 20-9 £26 Aug Bank 220 17 Aug Stationery 22526 Aug Discounts received 5

Dr Barbourne Limited Cr20-9 £ 20-9 £24 Aug Sales 570 30 Aug Bank 560 30 Aug Discounts allowed 10

Dr Discounts received Cr20-9 £ 20-9 £ 26 Aug Leam Ltd 5

Dr Discounts allowed Cr20-9 £ 20-9 £30 Aug Barbourne Ltd 10


1 0 a d v a n c e d b o o k k e e p i n g t u t o r z o n e

3.1 (c) Sales ledger control

3.2 (d) Purchases returns

3.3SANDRA VELAZQUEZ

Trial balance as at 30 April 20-6

Dr Cr £ £Cash 125Bank overdraft 2,340Vehicles 12,350Office equipment 3,750Purchases 18,294Purchases returns 876Sales 30,955Sales returns 1,263Purchases ledger control 3,097Sales ledger control 5,932Rent 1,450Wages 2,860Capital 8,756 46,024 46,024

Balancing accounts and the trialbalance3

a n s w e r s t o c h a p t e r a c t i v i t i e s 1 1

3.4 JANICE CARTWRIGHT

Trial balance as at 31 October 20-3 Dr Cr

£ £ Administration expenses 11,450 Bank loan 12,400 Bank overdraft 2,390 Capital 111,295 Cash 275 Drawings 8,655 Interest paid 1,970 Office equipment 8,400 Premises 110,000 Purchases 84,350 Purchases ledger control 10,465 Sales 170,850 Sales ledger control 22,965 Sales returns 3,270 Telephone 1,865 Travel expenses 2,195 Value Added Tax 2,640 Vehicles 18,990 Wages 35,655 310,040 310,040

3.5 (b) An error of principle

3.6 (b) An error of original entry

3.7 (d) A reversal of entries

3.8 (a) and (c) TONI JOHNSON

Dr Bank account Cr

20-6 £ 20-6 £1 May Capital 15,000 3 May Shop fittings 6,000

12 May Sales 1,100 27 May Wages 75018 May Sales 1,800 31 May Balance c/d 12,55020 May Sales 1,400 19,300 19,300

1 Jun Balance b/d 12,550 6 Jun Rent 7504 Jun Sales 850 8 Jun Shop fittings 2,500

18 Jun Sales 1,640 12 Jun Hi-Ball Ltd 7,600 23 Jun JK Sports Ltd 3,000 25 Jun Wages 850 30 Jun Balance c/d 340 15,040 15,040

1 Jul Balance b/d 340

Dr Capital account Cr

20-6 £ 20-6 £ 1 May Bank 15,000

Dr Shop fittings account Cr

20-6 £ 20-6 £3 May Bank 6,000 30 Jun Balance c/d 8,5008 Jun Bank 2,500

8,500 8,5001 Jul Balance b/d 8,500


Dr Purchases account Cr

20-6 £ 20-6 £6 May Hi-Ball Ltd 8,000 31 May Balance c/d 11,000

15 May JK Sports Ltd 3,000 11,000 11,000

1 Jun Balance b/d 11,000 30 Jun Balance c/d 13,15016 Jun JK Sports Ltd 2,150 13,150 13,150

1 Jul Balance b/d 13,150

Dr Hi-Ball Ltd Cr

20-6 £ 20-6 £23 May Purchases returns 400 6 May Purchases 8,00031 May Balance c/d 7,600 8,000 8,000

12 Jun Bank 7,600 1 Jun Balance b/d 7,600

Dr Sales account Cr

20-6 £ 20-6 £31 May Balance c/d 5,720 12 May Bank 1,100 18 May Bank 1,800 20 May Bank 1,400 26 May Croome School 1,420 5,720 5,720

30 Jun Balance c/d 8,210 1 Jun Balance b/d 5,720 4 Jun Bank 850 18 Jun Bank 1,640 8,210 8,210



Dr JK Sports Limited Cr

20-6 £ 20-6 £23 Jun Bank 3,000 15 May Purchases 3,00030 Jun Balance c/d 2,150 16 Jun Purchases 2,150 5,150 5,150


Dr Purchases returns account Cr

20-6 £ 20-6 £ 23 May Hi-Ball Ltd 400

Dr Croome School Cr

20-6 £ 20-6 £26 May Sales 1,420 19 Jun Sales returns 125 30 Jun Balance c/d 1,295 1,420 1,420


Dr Wages account Cr

20-6 £ 20-6 £27 May Bank 750 30 Jun Balance c/d 1,60025 Jun Bank 850 1,600 1,600


Dr Rent account Cr

20-6 £ 20-6 £6 Jun Bank 750

Dr Sales returns account Cr

20-6 £ 20-6 £19 Jun Croome School 125


(b) Trial balance as at 31 May 20-6 Dr Cr £ £Bank 12,550 Capital 15,000Shop fittings 6,000Purchases 11,000Hi-Ball Limited 7,600Sales 5,720JK Sports Limited 3,000Purchases returns 400Croome School 1,420Wages 750 31,720 31,720

(d) Trial balance as at 30 June 20-6

Dr Cr £ £Bank 340 Capital 15,000Shop fittings 8,500Purchases 13,150Sales 8,210JK Sports Limited 2,150Purchases returns 400Croome School 1,295Wages 1,600Rent 750Sales returns 125 25,760 25,760



4.1 (a) Purchases

4.2 (c) Capital

4.3

Income Expenses Profit Assets Liabilities Capital or loss* £ £ £ £ £ £Business 1 50,000 40,000 10,000 100,000 60,000 40,000Business 2 90,000 70,000 20,000 150,000 90,000 60,000Business 3 50,000 60,000 (10,000) 70,000 30,000 40,000Business 4 80,000 100,000 (20,000) 170,000 80,000 90,000Business 5 110,000 120,000 (10,000) 110,000 50,000 60,000

*Note: loss is indicated by brackets

Financial statements – the extendedtrial balance4

4.4

FINANCIAL STATEMENTS

TRIAL BALANCE STATEMENT OF STATEMENT OF PROFIT OR LOSS FINANCIAL POSITION

Debit Credit Debit Credit Debit Credit(a) Sales ✔ ✔

(b) Opening inventory ✔ ✔

(c) Purchases ledger control ✔ ✔

(d) Rent paid ✔ ✔

(e) Discounts allowed ✔ ✔

(f) Office equipment ✔ ✔

(g) Drawings ✔ ✔


4.5

EXT

ENDE

D TR

IAL

BALA

NCE

SAM

AVA

LOS

31

MAR

CH 2

0-8

Acco

unt n

ame

Ledg

er b

alan

ces

Adju

stm

ents

Stat

emen

t of

Stat

emen

t of

pr

ofit

or lo

ss

fin

anci

al p

ositi

on

Dr

Cr

Dr

C

r

Dr

Cr

Dr

C

r

£

£

£

£

£

£

£

£Op

ening

inve

ntor

y

1

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5

1

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5

Purc

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s

8

3,69

1

8

3,69

1Sa

les re

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e

157

,648

1

57,6

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nt a

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tes

10,

083

10,

083

Heat

ing a

nd lig

hting

3,6

24

3,6

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ages

and

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ries

3

5,82

2

3

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2Ve

hicle

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4,04

6

4,04

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verti

sing

3,

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3,

984

Prem

ises

at c

ost

100

,000

1

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00

Offic

e eq

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t cos

t

22,0

00

2

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hicles

at c

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0

35

,000

Sales

ledg

er c

ontro

l

19,

247

19,2

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nk

3

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3,

240

Cash

2

84

28

4Ca

pital

1

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00

112,

500

Draw

ings

1

8,91

3

18

,913

Loan

from

ban

k

65,5

00

65

,500

Purc

hase

s led

ger c

ontro

l

12

,286

12,2

86Va

lue A

dded

Tax

2

,475

2,4

75

Clos

ing in

vent

ory:

state

men

t of p

rofit

or lo

ss

1

2,65

5

12,

655

Clos

ing in

vent

ory:

state

men

t of f

inanc

ial p

ositio

n

12,6

55

1

2,65

5

Prof

it/los

s fo

r the

yea

r

1

8,57

8

1

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8

36

3,06

4

3

63,0

64

1

70,3

03

1

70,3

03

2

11,3

39

2

11,3

39


4.6

EX

TEND

ED T

RIAL

BAL

ANCE

JEN

NY C

LARK

30

JUN

E 20

-6Ac

coun

t nam

e

Le

dger

bal

ance

s

Ad

just

men

ts

St

atem

ent o

f

Stat

emen

t of

pr

ofit

or lo

ss

fin

anci

al p

ositi

on

Dr

Cr

Dr

C

r

Dr

Cr

Dr

C

r

£

£

£

£

£

£

£

£Ca

pital

26,0

00

26

,000

Sales

reve

nue

94,3

33

94

,333

Purc

hase

s

3

6,14

7

3

6,14

7Op

ening

inve

ntor

y

8,17

5

8,17

5Sa

laries

25,

148

25,

148

He

ating

and

light

ing

3

,071

3

,071

Rent

and

rate

s

5,29

4

5,29

4Ve

hicles

at c

ost

1

7,39

0

17

,390

Offic

e eq

uipm

ent a

t cos

t

3,4

50

3,45

0Su

ndry

exp

ense

s

1,0

86

1,0

86Ve

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7

3,41

7Sa

les le

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1

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6

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Pu

rcha

ses

ledge

r con

trol

9,2

73

9

,273

Value

Add

ed Ta

x

1,2

12

1

,212

Bank

5

,954

5,9

54Dr

awing

s

17,

248

17,2

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Clos

ing in

vent

ory:

state

men

t of p

rofit

or lo

ss

1

0,03

2

10,

032

Clos

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ry: st

atem

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f fina

ncial

pos

ition

1

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10

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Prof

it/los

s fo

r the

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r

2

2,02

7

2

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6,80

4

1

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04

1

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65

1

04,3

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64,

466

64,

466


5.1 (b) An expense prepaid

5.2 (c) A credit balance on prepaid income account

Accruals and prepayments5

5.3 (a)

Interest receivable £ £Accrued income (reversal) 90 Bank 917Statement of profit or loss 908 Accrued income 81 998 998

(b) 1 July 20-7


5.4 (a) Advertising expenses

£ £

Bank 11,200 Accrued expenses (reversal) 650

Statement of profit or loss 9,050

Prepaid expenses 1,500

11,200 11,200

(b) Office expenses

£ £ 20-4 Prepaid expenses 20-5 Statement of 1 Apr (reversal) 200 31 Mar profit or loss 4,940 20-5 31 Mar Bank 4,600 20-5 Accrued 31 Mar expenses 140

4,940 4,940

(c) Extract from the trial balance as at 31 March 20-5

Account £ Dr £ Cr £

Accrued expenses 140

Capital 30,000 30,000

Discount received 530 530

Drawings 9,500 9,500

Interest received 120 120

Machinery at cost 18,000 18,000

Prepaid expenses 1,500

Sales returns 860 860


5.5

EX

TEND

ED T

RIAL

BAL

ANCE

CHE

RYL

COLL

INS

31

DECE

MBE

R 20

-1Ac

coun

t nam

e

Le

dger

bal

ance

s

Ad

just

men

ts

St

atem

ent o

f

St

atem

ent o

f

prof

it or

loss

finan

cial

pos

ition

Dr

C

r

Dr

Cr

Dr

C

r

Dr

Cr

£

£

£

£

£

£

£

£

Capit

al

40

,000

40,0

00Dr

awing

s

10,

860

500

1

1,36

0Pu

rcha

ses

110,

355

500

109

,855

Sa

les re

venu

e

195

,463

1

95,4

63

Ve

hicles

at c

ost

2

7,50

0

27

,500

Vehic

le ex

pens

es

6,

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90

6,3

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an fr

om b

ank

22

,500

22,5

00Ba

nk

3

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3,

147

Offic

e eq

uipm

ent a

t cos

t

9,7

50

9,75

0W

ages

45

,233

45,

233

Disc

ount

s all

owed

247

247

Disc

ount

s re

ceive

d

396

3

96

Rent

and

rate

s

7,23

8

4

50

6,

788

Sa

les le

dger

con

trol

4

0,29

6

40

,296

Purc

hase

s led

ger c

ontro

l

19

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19,4

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mini

strat

ion e

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ses

11

,334

12

5

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les re

turn

s

1,0

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1,0

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ses

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ing in

vent

ory

10,

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10,

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Value

Add

ed Ta

x

3,6

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3

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Clos

ing in

vent

ory:

state

men

t of p

rofit

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ss

1

0,85

4

10,

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Cl

osing

inve

ntor

y: sta

tem

ent o

f fina

ncial

pos

ition

10

,854

10,

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Ac

crua

ls

90

90Pr

epay

men

ts

575

5

75

Prof

it/los

s fo

r the

yea

r

1

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2

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1,

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1

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208

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208

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103

,482

103

,482


6.1 (a) £1,875

6.2 (c) £2,875

6.3 (d) £23,760

6.4 (b) Gain on disposal of £250

6.5 Debit Credit(c) Statement of profit or loss Disposals account

Depreciation of non-current assets6


6.6 (a) Year 1 £2,000 Year 2 £1,600 Total £3,600

(b) Van at cost

Balance b/d £10,000 Disposals £10,000

£10,000 £10,000

Van: disposals

Van: accumulatedVan at cost £10,000 depreciation £3,600

Statement of profit or loss £200 Bank £6,600

£10,200 £10,200

Bank

Van disposals *£7,920 Balance c/d £7,920

£7,920 £7,920

*£6,600 + £1,320 (VAT)

(c) Gain


6.7

EX

TEND

ED T

RIAL

BAL

ANCE

CIN

DY S

MIT

H

3

0 JU

NE 2

0-4

Acco

unt n

ame

Ledg

er b

alan

ces

Adju

stm

ents

Stat

emen

t of

Stat

emen

t of

pr

ofit

or lo

ss

fin

anci

al p

ositi

on

Dr

Cr

Dr

C

r

Dr

Cr

Dr

C

r

£

£

£

£

£

£

£

£Ca

pital

38,8

25

38

,825

Open

ing in

vent

ory

18,

050

18,

050

Purc

hase

s

7

4,28

0

7

4,28

0Sa

les re

venu

e

149

,410

1

49,4

10Di

scou

nts

allow

ed a

nd re

ceive

d

3,

210

1,14

0

3,2

10

1,1

40Re

nt a

nd ra

tes

7,

280

9

5

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85Sa

les a

nd p

urch

ases

retu

rns

1

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87

5

1,6

45

8

75Ba

nk

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00

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Sales

ledg

er c

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l

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375

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ses

ledge

r con

trol

8,0

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8

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Wag

es a

nd s

alarie

s

43,

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43,

895

Gene

ral e

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ses

2,

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175

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90Ve

hicles

at c

ost

3

0,00

0

30

,000

Vehic

les: a

ccum

ulate

d de

prec

iation

7

,500

5,6

25

13

,125

Mac

hiner

y at

cos

t

1

0,00

0

10

,000

Mac

hiner

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cum

ulate

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iation

3,0

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1

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hicle

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nses

6,72

5

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non

-cur

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et

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20

8

20Dr

awing

s

12,

500

12,5

00Va

lue A

dded

Tax

3

,180

3,1

80

Clos

ing in

vent

ory:

state

men

t of p

rofit

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ss

2

0,14

5

20,

145

Clos

ing in

vent

ory:

state

men

t of f

inanc

ial p

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20,1

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2

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1

75

175

Prep

aym

ents

95

9

5

Depr

eciat

ion c

harg

es

6

,625

6,

625

Prof

it/los

s fo

r the

yea

r

6,4

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6,4

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24

5,44

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2

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40

6,

895

6

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171

,570

171

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8

7,11

5

8

7,11

5


7.2 (d) Increase profit for the year

7.3 (b) £4,010

7.1 Debit Credit(a) Irrecoverable debts account Egan Ltd’s account

Note: where control accounts – see Chapter 10 of the Tutorial – are in use, the credit entry will beto sales ledger control account.

7.4 Year Statement of profit or loss Statement of financial position Dr Dr Cr Dr Cr irrecoverable allowance for allowance for sales ledger allowance for debts doubtful debts: doubtful debts: control doubtful debts adjustment adjustment £ £ £ £ £

20-1 700 3,368 – 84,200 3,368

20-2 500 336 – 92,600 3,704

20-3 600 – 48 91,400 3,656

Irrecoverable debts and allowance fordoubtful debts7


7.5 (a) Irrecoverable debts

£ £Sales ledger control 90 Statement of profit or loss 295(Fennell & Co)Sales ledger control 160(A Sheldon)Sales ledger control 45(Palgrave Stores)

295 295

(b) Allowance for doubtful debts

£ £20-3 20-231 Mar Balance c/d 806 01Apr Balance b/d 600

20-3 Allowance for doubtful 31 Mar debts: adjustment 206

806 806

(c) Extract from the trial balance as at 31 March 20-3

Account Ledger balances Adjustments

Dr Cr Dr Cr £ £ £ £Allowance for doubtful debts 600 206

Allowance for doubtful debts: adjustment 206

Irrecoverable debts 295

Purchases ledger control 12,345

Sales ledger control 20,445 295

Machinery at cost 15,000

Machinery: accumulated depreciation 8,750

Wages and salaries 33,140


7.6

EX

TEND

ED T

RIAL

BAL

ANCE

AND

REW

BRO

WN

31

DEC

EMBE

R 20

-5Ac

coun

t nam

e

Le

dger

bal

ance

s

Ad

just

men

ts

St

atem

ent o

f

St

atem

ent o

f

prof

it or

loss

finan

cial

pos

ition

Dr

C

r

Dr

Cr

Dr

C

r

Dr

Cr

£

£

£

£

£

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8.1 (d) Accruals

8.2 (b) Materiality

8.4 (a) Integrity and (b) Objectivity

The rules of accounting8

8.3

Professional behaviour

Professional competenceand due care

Confidentiality

Integrity

Objectivity

Information should not be disclosed to thirdparties without permission or right

Ensuring that business transactions aregenuine and valid

Having up-to-date and relevant skills andknowledge

Not allowing the influence or interest of othersto override professional judgement

Complying with relevant laws and regulationsand not discrediting the profession


8.5 (a) Sales revenue for the half year £ • product A (60 at £20 + 120 at £22) 3,840.00 • product B (350 at £8.50 + 300 at £6) 4,775.00 • total sales 8,615.00

(b) FIFO Product A £ 60 units at £13.00 per unit 780.00 70 units at £13.50 per unit 945.00 130 units 1,725.00

(c) FIFO Product B £ 100 units at £6.00 per unit 600.00 150 units at £5.50 per unit 825.00 250 units 1,425.00

(d) Total inventory valuation £ • product A 1,725.00 (cost price) • product B 1,300.00 (net realisable value) 3,025.00 (e) Cost of sales £ Purchases • product A *3,725.00 • product B **4,925.00 8,650.00 Less closing inventory 3,025.00 Cost of sales 5,625.00

*£800 + £1,200 + £780 + £945 **£1,500 + £1,100 + £1,500 + £825

8.6 (a) According to IAS 2, Inventories, the basis of inventory valuation is ‘at the lower of cost andnet realisable value’.

(b) (b) £275 (100 at £2 per box + 50 at £1.50 per box)

(c) (c) £15 decrease

(d) (b) Decrease

8.7 (a) £252,000 Working: £360,000 x (100 – 30)/100

(b) £125,000 Working: £150,000 x 100/(100 + 20)


8.8 (a), (e), (g) and (i) are capital expenditure; (b), (c), (d), (f) and (h) are revenue expenditure


9.1 (d) Land

9.2 (b) Terry Taylor, the owner of Terry’s Transport

Accounting for capital transactions9

9.3 Depreciation calculations: 20-4 20-5 20-6 TOTAL £ £ £ £Lorry 1 8,000 6,400 – 14,400Lorry 2 8,000 6,400 5,120 19,520Lorry 3 – – 12,000 12,000Lorry 4 – – 12,000 12,000TOTAL 16,000 12,800 29,120 57,920

Dr Vehicles at cost account Cr 20-4 £ 20-4 £01 Jan Bank 40,000 31 Dec Balance c/d 80,00001 Jan Bank 40,000 80,000 80,000

20-5 20-501 Jan Balance b/d 80,000 31 Dec Balance c/d 80,000

20-6 20-601 Jan Balance b/d 80,000 11 Aug Disposals 40,00001 Jan Bank 60,000 31 Dec Balance c/d 160,00001 Jan Bank 60,000 200,000 200,000

20-7 20-701 Jan Balance b/d 160,000

Dr Depreciation charge account Cr 20-4 £ 20-4 £31 Dec Vehicles: accumulated depreciation 16,000 31 Dec Statement of profit or loss 16,000

20-5 20-531 Dec Vehicles: accumulated depreciation 12,800 31 Dec Statement of profit or loss 12,800

20-6 20-631 Dec Vehicles: accumulated depreciation 29,120 31 Dec Statement of profit or loss 29,120


Dr Vehicles: accumulated depreciation account Cr 20-4 £ 20-4 £31 Dec Balance c/d 16,000 31 Dec Depreciation charge 16,00020-5 20-531 Dec Balance c/d 28,800 01 Jan Balance b/d 16,000 31 Dec Depreciation charge 12,800 28,800 28,80020-6 20-611 Aug Disposals 14,400 01 Jan Balance b/d 28,80031 Dec Balance c/d 43,520 31 Dec Depreciation charge 29,120 57,920 57,92020-7 20-7 01 Jan Balance b/d 43,520

Dr Vehicle disposals account Cr 20-6 £ 20-6 £11 Aug Vehicles 40,000 11 Aug Vehicles: accumulated11 Aug Statement of profit or loss depreciation 14,400 (gain on disposal) 1,900 11 Aug Bank 27,500 41,900 41,900



9.4 (a) to (c)

Notes:• installation of the computer in the office is capitalised• the computer software is revenue expenditure

9.5 (d) Hire purchase

(e) Finance lease

NON-CURRENT ASSET REGISTER

Description/ Acquisition Cost Depreciation Carrying Funding Disposal Disposalserial number date charges amount method proceeds date

£ £ £ £

Office equipment

Conan laser printer 10/02/-5 2,000.00 Cash

Year ended 31/03/-5 400.00 1,600.00

Year ended 31/03/-6 400.00 1,200.00

Year ended 31/03/-7 400.00 800.00

HQL computer 15/04/-6 1,200.00 Cash

Year ended 31/03/-7 240.00 960.00

Vehicles

VK54 JEC 15/09/-4 12,400.00 Cash

Year ended 31/03/-5 3,100.00 9,300.00

Year ended 31/03/-6 2,325.00 6,975.00

Year ended 31/03/-7 – – 6,000.00 20/01/X7

VO55 DBC 10/02/-6 16,800.00 Part-exchange

Year ended 31/03/-6 4,200.00 12,600.00

Year ended 31/03/-7 3,150.00 9,450.00


10.1 (a) and (c) would cause a difference; (b) and (d) would cause no difference

Control accounts10

10.2 (a) PURCHASES LEDGER

Dr Bedford Ltd Cr

20-6 £ 20-6 £11 Jan Purchases returns 59.68 1 Jan Balance b/d 596.4131 Jan Balance c/d 884.92 7 Jan Credit purchases 348.19 944.60 944.60 1 Feb Balance b/d 884.92

Dr Chester & Co Cr

20-6 £ 20-6 £11 Jan Purchases returns 12.34 1 Jan Balance b/d 602.0331 Jan Balance c/d 717.24 5 Jan Credit purchases 127.55 729.58 729.58 1 Feb Balance b/d 717.24

Dr Dennis Trading Cr

20-6 £ 20-6 £15 Jan Bank 250.00 1 Jan Balance b/d 228.1431 Jan Balance c/d 400.33 7 Jan Credit purchases 422.19 650.33 650.33 1 Feb Balance b/d 400.33

Dr Farnham Ltd Cr

20-6 £ 20-6 £21 Jan Bank 746.32 1 Jan Balance b/d 487.2921 Jan Discounts received 39.28 5 Jan Credit purchases 298.31 785.60 785.60

(c) Reconciliation of purchases ledger control account

1 January 20-6 31 January 20-6 £ £ Bedford Ltd 596.41 884.92 Chester & Co 602.03 717.24 Dennis Trading 228.14 400.33 Farnham Ltd 487.29 nil Purchases ledger control account 1,913.87 2,002.49

(b)

Dr Purchases ledger control account Cr

20-6 £ 20-6 £31 Jan Purchases returns 72.02 1 Jan Balance b/d 1,913.8731 Jan Payments to trade payables 996.32 31 Jan Credit purchases 1,196.24 31 Jan Discounts received 39.2831 Jan Balance c/d 2,002.49 3,110.11 3,110.11 1 Feb Balance b/d 2,002.49



10.3Dr Purchases ledger control account Cr

20-4 £ 20-4 £31 Jan Purchases returns 1,843 1 Jan Balance b/d 24,08031 Jan Discounts received 494 31 Jan Credit purchases 137,82531 Jan Payments to trade payables 135,048 31 Jan Set-off: sales ledger 81231 Jan Balance c/d 23,708 161,905 161,905

1 Feb Balance b/d 23,708

Dr Sales ledger control account Cr

20-4 £ 20-4 £1 Jan Balance b/d 35,563 31 Jan Sales returns 3,081

31 Jan Credit sales 205,610 31 Jan Discounts allowed 54831 Jan Returned cheques 856 31 Jan Payments from trade receivables 197,045 31 Jan Set-off: purchases ledger 812 31 Jan Irrecoverable debts 110 31 Jan Balances c/d 40,433 242,029 242,0291 Feb Balance b/d 40,433

Note: the increase in allowance for doubtful debts is not recorded in the sales ledger controlaccount.

10.4 (a) (a) Credit; all remaining options Debit

(b) (c) Zero

10.5 Adjustment Amount Debit Credit number £

2 18 ✔

3 100 ✔

4 195 ✔



1 10 ✔

2 90 ✔

4 210 ✔


1 180 ✔

3 55 ✔

4 390 ✔

10.8 (d) £4,140 credit


11.1 (a) Opening transaction of a new business

11.2 Debit Credit

(b) Stationery £75 Suspense £75

11.3 Debit Credit

(d) Bank £84 Suspense £84 Suspense £48 Bank £48

The journal and correction of errors11


11.4 (a) Extract from extended trial balance

Ledger balances Adjustments

Dr Cr Dr Cr £ £ £ £

Allowance for doubtful debts 500 150

Allowance for doubtful debts: adjustment 150

Closing inventory – statement of financial position *20,190

Closing inventory – statement of profit or loss *20,190

Depreciation charge 1,500

Office equipment – accumulated depreciation 5,500

Office expenses 6,350

Rent and rates 4,980 750

Purchases 45,300

Purchases ledger control 6,850 640

Suspense 110 640 750

VAT 1,720

Wages 14,850

*lower of cost and net realisable value: £20,360 – £970 + £800

(b)

Account Dr Cr

Statement of profit or loss ✔

Wages ✔


11.5 (a) Journal

Dr Cr £ £ Irrecoverable debts 150

Sales ledger control 150

(b) Journal

Dr Cr £ £ Office expenses 1,200

Suspense 1,200

(c) Journal

Dr Cr £ £ Closing inventory – Statement of financial position *15,060

Closing inventory – Statement of profit or loss *15,060

*lower of cost and net realisable value: £15,240 – £680 + £500

(d) Journal

Dr Cr £ £ Suspense 6,800

Sales ledger control 6,800

Sales ledger control 8,160

Suspense 8,160


11.6 Extended trial balance

Ledger account Ledger balances Adjustments Statement of Statement of profit or loss financial position

Dr £ Cr £ Dr £ Cr £ Dr £ Cr £ Dr £ Cr £

Allowance for doubtful debts 800 200 1,000

Allowance for doubtfuldebts: adjustment 200 200

Bank 5,200 5,200

Capital 35,000 35,000

Closing inventory 11,690 11,690 11,690 11,690

Depreciation charge 3,600 3,600

Machinery at cost 45,000 45,000

Machinery:accumulated depreciation 12,200 3,600 15,800

Office expenses 13,200 300 12,900

Opening inventory 12,740 12,740

Payroll expenses 45,600 400 46,000

Purchases 76,400 800 75,600

Purchases ledger control 17,320 17,320

Rent and rates 6,850 290 7,140

Sales 159,520 159,520

Sales ledger control 33,450 33,450

Suspense 410 1,100 690

VAT 2,790 2,790

Profit/loss for the year 13,030 13,030

233,240 233,240 17,280 17,280 171,210 171,210 90,140 90,140

Note: the credit balance on suspense account is cleared by the debit adjustment of £1,100 (£300 and£800), and the credit adjustment of £690 (£400 and £290).

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