OSBORNE BOOKS ANSWER SHEET .pdf

1.7

CHAPTER 1 What is financial accounting? 1 .2 .2

1.3

P ur ur po po se se s o f a cc cc ou ou nt nt in in g: g: 1. To quantif quantify y items items such such as as sales, es, expense expenses s and prof profit it 2. To present present the accounts accounts in a meaningful ngful way way so as to measur measure e the success success of the the business ness 3. To provide de informat information ion to the the owner owner of the busines business s and to other other stakehold stakeholders ers

•

documents processing of source documents relating to accounting transactions

• 

initial recording of transactions recording accounting transactions in subsidiary books (or books of prime entry)

• 

double-entry accounts system transfer from subsidiary books into the double-entry book-keeping system of accounts in the ledger

• 

trial balance extraction of figures from all the double-entry accounts to check their accuracy

• 

final accounts production of an income statement and a balance sheet

2.1

1 .4 .4

1.5

1.6

purchases of goods for resale to date

•

assets owned

•

turnover (cash and credit sales) to date

•

liabilities owed

•

overheads and expenses to date

•

profit during a particular period

•

trade trad e receivables vables – total total amount amount owed owed to the the business, ness, and indivi individual dual trade trade receiv receivable ables s

•

trade trad e payables payables – total total amount amount owed by the busin business, ess, and indivi ndividual dual trade payab payables les

O th th er er st st ak ak eh eh ol ol de de rs rs – a ny ny

asse as sett of of ban bank k incre n creas ases es by £8 £8,0 ,000 00 capital increases by £8,000 asset £8,000 – liability £0 = capital £8,000

•

asse as sett of co comp mput uter er incre n creas ases es by by £4,0 £4,000 00 asset of bank decreases by £4,000 asset £8,000 – liability £0 = capital £8,000

•

asse as sett of of ban bank k incre n creas ases es by £3 £3,0 ,000 00 liability of loan increases by £3,000 asset £11,000 – liability £3,000 = capital £8,000

•

asse as sett of of van van in incr crea ease ses s by by £6, £6,00 000 0 asset of bank decreases by £6,000 asset £11,000 – liability £3,000 = capital £8,000

CHAPTER 2 Double-entry book-keeping: first principles

Information from the accounting system includes: •

•

£

Cr B ank

Computer Account

Dr 20-1 6 Feb

20-1 1 Feb

Bank

£ 2,000

£ 7,500

Cr

20-1

£

four  from

•

providers ders of of finance, finance, eg the bank bank manager manager if the busine business ss wants wants to borro borrow w from the bank bank

•

suppliers, iers, who wish wish to asses assess s the likel ikelihood ihood of receivi receiving ng payment payment from from the busin business ess

•

customers,, who wish customers wish to ensure ensure that that the busin business ess has the the financia financiall strength strength to to continue nue selling ling the the goods and services that they buy

•

employees oyees and trade trade unions, ons, who who wish sh to check check on the the financia financiall prospects prospects of the busin business ess

•

the tax author authoritie ities, s, who willll wish wish to see that that tax due by the the business ness on profit profits s and for Value Added Added Tax has been paid

•

competit comp etitors, ors, who wish to assess assess the profitabil tability ity of the the busines business s

•

pote po tent ntia iall inv inves esto tors rs in the the bus busin ines ess s

•

the local local communi community ty and nationa nationall interest interest groups, groups, who who may be seekin seeking g to influence uence busine business ss policy cy

•

government gover nment and and official official bodie bodies, s, eg Compani Companies es House House who need need to see the the final final accounts accounts of limited imited companies

(a)

Business entity  – the accounts record and report on the financial transactions of a particular business, and not the owner's personal financial transactions.

(b)

Money measurement – the accounting accounting system uses money as the common denominator in recording and reporting all business transactions; thus the loyalty of a firm's workforce or the quality of a product cannot be recorded because these cannot be reported in money terms.

Rent Paid Account

Dr 20-1 8 Feb

Bank

Dr 20-1 12 Feb 25 Feb

Bank Bank

Dr

•

trade recei receivables vables – individual individuals or businesses nesses who owe owe money in respect respect of goods goods or services services suppli supplied ed by the business; trade payables – individuals or businesses to whom money is owed by the business

Dr

•

purchases – goods purchases goods bought, bought, whethe whetherr on credit credit or for for cash, cash, which ch are intended ntended to be resol resold later; later; sales es  – the sale of goods, whether on credit or for cash, in which the business ness trades

20-1 23 Feb

credit purchases purchases – goods goods bought, bought, with with payment payment to to be made at at a later later date; date; cash purcha purchases ses – goods goods bought, with immediate payment made in cash, by cheque, debit card, credit card, or bank transfer

1

Cr

20-1

£

Wages Account

Cr

£ 425 380

£

20-1

assets asset s – items items owned owned by a busines business; s; liabili abilities ties – items items owed owed by a business ness

£ 750

20-1

£

Bank Loan Account

Dr 20-1

•

•

Capital Account

Dr 20-1

£ 2,500

Commission Income Account

Cr

20-1 20 Feb

Drawings Account

Bank

Cr Bank

£

20-1 14 Feb

£ 200

20-1

Bank Ba

£ 145

Cr £

1.7

CHAPTER 1 What is financial accounting? 1 .2 .2

1.3

P ur ur po po se se s o f a cc cc ou ou nt nt in in g: g: 1. To quantif quantify y items items such such as as sales, es, expense expenses s and prof profit it 2. To present present the accounts accounts in a meaningful ngful way way so as to measur measure e the success success of the the business ness 3. To provide de informat information ion to the the owner owner of the busines business s and to other other stakehold stakeholders ers

•

documents processing of source documents relating to accounting transactions

• 

initial recording of transactions recording accounting transactions in subsidiary books (or books of prime entry)

• 

double-entry accounts system transfer from subsidiary books into the double-entry book-keeping system of accounts in the ledger

• 

trial balance extraction of figures from all the double-entry accounts to check their accuracy

• 

final accounts production of an income statement and a balance sheet

2.1

1 .4 .4

1.5

1.6

purchases of goods for resale to date

•

assets owned

•

turnover (cash and credit sales) to date

•

liabilities owed

•

overheads and expenses to date

•

profit during a particular period

•

trade trad e receivables vables – total total amount amount owed owed to the the business, ness, and indivi individual dual trade trade receiv receivable ables s

•

trade trad e payables payables – total total amount amount owed by the busin business, ess, and indivi ndividual dual trade payab payables les

O th th er er st st ak ak eh eh ol ol de de rs rs – a ny ny

asse as sett of of ban bank k incre n creas ases es by £8 £8,0 ,000 00 capital increases by £8,000 asset £8,000 – liability £0 = capital £8,000

•

asse as sett of co comp mput uter er incre n creas ases es by by £4,0 £4,000 00 asset of bank decreases by £4,000 asset £8,000 – liability £0 = capital £8,000

•

asse as sett of of ban bank k incre n creas ases es by £3 £3,0 ,000 00 liability of loan increases by £3,000 asset £11,000 – liability £3,000 = capital £8,000

•

asse as sett of of van van in incr crea ease ses s by by £6, £6,00 000 0 asset of bank decreases by £6,000 asset £11,000 – liability £3,000 = capital £8,000

CHAPTER 2 Double-entry book-keeping: first principles

Information from the accounting system includes: •

•

£

Cr B ank

Computer Account

Dr 20-1 6 Feb

20-1 1 Feb

Bank

£ 2,000

£ 7,500

Cr

20-1

£

four  from

•

providers ders of of finance, finance, eg the bank bank manager manager if the busine business ss wants wants to borro borrow w from the bank bank

•

suppliers, iers, who wish wish to asses assess s the likel ikelihood ihood of receivi receiving ng payment payment from from the busin business ess

•

customers,, who wish customers wish to ensure ensure that that the busin business ess has the the financia financiall strength strength to to continue nue selling ling the the goods and services that they buy

•

employees oyees and trade trade unions, ons, who who wish sh to check check on the the financia financiall prospects prospects of the busin business ess

•

the tax author authoritie ities, s, who willll wish wish to see that that tax due by the the business ness on profit profits s and for Value Added Added Tax has been paid

•

competit comp etitors, ors, who wish to assess assess the profitabil tability ity of the the busines business s

•

pote po tent ntia iall inv inves esto tors rs in the the bus busin ines ess s

•

the local local communi community ty and nationa nationall interest interest groups, groups, who who may be seekin seeking g to influence uence busine business ss policy cy

•

government gover nment and and official official bodie bodies, s, eg Compani Companies es House House who need need to see the the final final accounts accounts of limited imited companies

(a)

Business entity  – the accounts record and report on the financial transactions of a particular business, and not the owner's personal financial transactions.

(b)

Money measurement – the accounting accounting system uses money as the common denominator in recording and reporting all business transactions; thus the loyalty of a firm's workforce or the quality of a product cannot be recorded because these cannot be reported in money terms.

Rent Paid Account

Dr 20-1 8 Feb

Bank

Dr 20-1 12 Feb 25 Feb

Bank Bank

Dr

•

trade recei receivables vables – individual individuals or businesses nesses who owe owe money in respect respect of goods goods or services services suppli supplied ed by the business; trade payables – individuals or businesses to whom money is owed by the business

Dr

•

purchases – goods purchases goods bought, bought, whethe whetherr on credit credit or for for cash, cash, which ch are intended ntended to be resol resold later; later; sales es  – the sale of goods, whether on credit or for cash, in which the business ness trades

20-1 23 Feb

credit purchases purchases – goods goods bought, bought, with with payment payment to to be made at at a later later date; date; cash purcha purchases ses – goods goods bought, with immediate payment made in cash, by cheque, debit card, credit card, or bank transfer

1

Cr

20-1

£

Wages Account

Cr

£ 425 380

£

20-1

assets asset s – items items owned owned by a busines business; s; liabili abilities ties – items items owed owed by a business ness

£ 750

20-1

£

Bank Loan Account

Dr 20-1

•

•

Capital Account

Dr 20-1

£ 2,500

Commission Income Account

Cr

20-1 20 Feb

Drawings Account

Bank

Cr Bank

£

20-1 14 Feb

£ 200

20-1

Bank Ba

£ 145

Cr £

Dr 20-1 28 Feb

2.3

Dr 20-5 1 Aug 15 Aug 20 Aug 25 Aug

Cr £

B ank Ba

Van Account £ 20-1 6,000

Capital S Orton: loan Office fittings Commission received

Bank Account £ 20-5 5,000 3 Aug 1,000 7 Aug 250 12 Aug 150 27 Aug

Cr £ 1,800 100 2,000 150

Computer Rent paid Office fittings S Orton: loan

Capital Account £ 20-5 1 Aug Ba B ank

Dr 20-5

2.5

Bank Account

Dr 20-7 1 Nov 7 Nov 23 Nov 25 Nov 28 Nov

Capital Bank loan Cash Office fittings Commission received

20-7

£

Bank

Cr £

20-7

Bank

Computer Account £ 20-5 1,800

Cr £

Bank

Rent Paid Account £ 20-5 100

20-7 10 Nov

Cr £ 200 150

20-7 12 Nov

Bank

Dr 20-5 10 Aug

Dr 20-5 12 Aug

Commission received

Bank

Cash Account £ 20-5 200 17 Aug

Drawings

Office Fittings Account £ 20-5 2,000 20 Aug Ba B ank

Bank

Cr £ 100

Bank

Cr £ 250

Commission received

Bank

Sally Orton: Loan Account £ 20-5 150 15 Aug Ba B ank

Cash

Drawings Account £ 20-5 100

20-7 18 Nov Dr 20-7 20 Nov

2

Bank

Cr

Rates Account

Cr

£ 3,000

20-7

£ 1,500

20-7 25 Nov

£ 300

20-7 18 Nov 23 Nov

20-7 15 Nov 28 Nov

Drawings Account

Cash

£ 70,000

£

Cr £ 1,000

Cr £

Bank

20-7

£

Dr Dr 20-5 17 Aug

Cr

Cr

£

B ank Ba

£ 125

Cr £ 200 Cr

Drawings Bank Ba

Commission Income Account

Dr 20-7

Dr 20-5 27 Aug

£ 130,000

£ 75,000

£

Cash Account

Dr 20-7 15 Nov

Bank

20-7

20-7 7 Nov

£ 2,500 130,000 3,000 1,500 250 Cr

Office Fittings Account

Dr 20-7 14 Nov

20-7 1 Nov

Office Premises Account

Dr Commission Income Account £ 20-5 10 Aug Ca Cash 25 Aug Ba Bank

Dr 20-5

£ 2,500

£

Dr Dr 20-5 7 Aug

Photocopier Office premises Business rates Office fittings Wages

Bank Loan Account

Dr Dr 20-5 3 Aug

Cr

Photocopier Account

Dr 20-7 3 Nov

20-7 3 Nov 10 Nov 12 Nov 14 Nov 20 Nov

Capital Account

Dr

Cr £ 5,000

£ 75,000 70,000 100 200 200

Ca C ash Bank Ba

£ 125 100 Cr £ 300 200 Cr

20-7

£

Wages Account

Cr

£ 250

20-7

£

2.6

Bank Account

20-7 1 Nov 3 Nov 7 Nov 10 Nov 12 Nov 14 Nov 20 Nov 23 Nov 25 Nov 28 Nov 2.7

Debit £ 75,000

Capital Photocopier Bank loan Office premises Rates Office fittings Wages Cash Office fittings Commission received

Credit £ 2,500

70,000 130,000 3,000 1,500 250 100 200 200

Balance £ 75,000 72,500 142,500 12,500 9,500 8,000 7,750 7,850 8,050 8,250

Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr

Dr 20-2 22 Oct

Dr 20-2 25 Oct

Guidance to the trainee to include: • the use of accounts to record dif ferent types of transactions • the principles of double-entry book-keeping whereby one account is debited and one account is credited for every business transaction • the debit entry is made in the account which gains value, or records an asset, or an expense • the credit entry is made in the account which gives value, or records a liability, or an income item • examples can be given using bank account where money in is recorded on the debit side, and money out is recorded on the credit side • an explanatio n of various accounts inclu din g  – capital – the amount of money invested in the business by the owner  – non-current assets – items purchased by a business for use on a long-term basis (noting the distinction between capital expenditure and revenue expenditure)  – expenses – the day-to-day running expenses (revenue expenditure) of the business  – income – amounts of income received by the business  – owner’s drawings – where the owner takes money in cash or by cheque (or sometimes goods) from the business for personal use  – loans – where a business receives a loan, eg from a relative or the bank

3.5

Dr 20-2 1 Oct 4 Oct 8 Oct 12 Oct 18 Oct 30 Oct

Capital Sales Sales K Smithson: loan Sales Sales

Dr 20-2

Purchases P urchases Purchases Delivery van Wages

Capital Account £ 20-2 1 Oct Bank

Dr 20-2 Dr 20-2 2 Oct 6 Oct 14 Oct

Bank Account £ 20-2 2,500 2 Oct 150 6 Oct 125 14 Oct 2,000 22 Oct 155 25 Oct 110

Bank Bank Bank

Purchases Account £ 20-2 200 90 250 Sales Account £ 20-2 4 Oct 8 Oct 18 Oct 30 Oct

Dr 20-2 26 Apr

£

Dr 20-2 5 Apr

Cr £ 2,500

Dr 20-2 7 Apr 12 Apr 22 Apr

Cr £ 150 125 155 110

Dr 20-2

3

20-2 12 Oct

Bank

Delivery Van Account

Bank

£ 4,000

20-2

Wages Account

Bank

£ 375

Wyvern Producers Ltd A Larsen

£ 200 250

Purchases returns Bank

Purchases returns

£ 45

20-2 2 Apr

Purchases

Cr £ 200

Purchases

Cr £ 250

Pershore Patisserie Bank Bank Cash

Cr £ 150 175 110 100

Sales returns Bank

Cr £ 25 125

Wyvern Producers Ltd Amery Scales Ltd

Cr £ 150 250

A Larsen

20-2 4 Apr

Sales Account

£

20-2 5 Apr 7 Apr 12 Apr 28 Apr

Pershore Patisserie

Sales

£ 150

20-2 15 Apr 22 Apr

Bank Account

Sales Sales Pershore Patisserie

£ 175 110 125

20-2 20 Apr 30 Apr

Purchases Returns Account

£

20-2 9 Apr 26 Apr

Cr £

Cr £

20-2

Wyvern Producers Ltd

£ 50 150

Cr £ 2,000

Cr £

20-2

Purchases Account

Dr 20-2

Cr £ 200 90 250 4,000 375

Cr £

Bank Bank Bank Bank

Dr 20-2 2 Apr 4 Apr

Dr 20-2 9 Apr 20 Apr

CHAPTER 3 Double-entry book-keeping: further transactions 3.1

J Smithson: Loan Account

Dr 20-2

Wyvern Producers Ltd A Larsen

Cr £ 50 45

Dr 20-2 15 Apr

Dr 20-2 17 Apr

Dr 20-2 30 Apr

Dr 20-2 28 Apr

Dr 20-2 29 Apr

3.6

Dr 20-3 2 Jun 7 Jun 23 Jun

Dr 20-3 6 Jun 18 Jun

Sales Returns Account

Pershore Patisserie

Dr 20-3 5 Jun 20 Jun

20-2

Weighing Machine Account

Amery Scales Ltd

£ 250

20-2

Amery Scales Ltd

Bank

£ 250

20-2 17 Apr

Weighing machine

Cash Account

Sales

£ 100

20-2 29 Apr

Wages

Wages Account

Cash

£ 90

Designs Ltd Mercia Knitwear Ltd Designs Ltd

£ 350 400 285

Purchases returns Bank

20-3 4 Jun 5 Jun 10 Jun 12 Jun 20 Jun

Bank Cash Wyvern Trade Supplies Bank Cash

Cr £ 220 115 350 175 180

Designs Ltd

Cr £ 250

Bank Account

Sales Sales Wyvern Trade Supplies

£ 220 175 300

20-3 18 Jun

Sales Sales

Dr 20-3 15 Jun

Dr 20-3 26 Jun

3 .8

20-3 6 Jun 17 Jun

Designs Ltd Mercia Knitwear Ltd

Mercia Knitwear Ltd

Purchases returns

£ 80

20-3 7 Jun

Purchases

Wyvern Trade Supplies

Sales

£ 350

20-3 15 Jun 28 Jun

Sales returns Bank

Sales Returns Account

Wyvern Trade Supplies

£ 50

Cash

Transaction (a) (b) (c) (d) (e) (f) (g) (h)

Account debited purchases bank purchases L Harris Teme Traders sales returns bank cash

Cr £ 400

Cr £ 50 300

Cr £

20-3

Rent Paid Account

£ 125

Cr £ 100 80

Cr £

20-3

Account credited bank sales Teme Traders sales purchases returns L Harris D Perkins: loan bank

A nsw er s t o t he tr ai ne e:

•

Separate accounts for purchases and sales enable the business to know the amount of goods bought and sold. A combined account for ‘goods’ would not provide this information so readily.

•

Purchases and sales accounts follow the principles of book-keeping in that the debit side of purchases account gains value when the business buys goods for resale, while the credit side of sales account gives value when the business sells goods.

•

The purchase of a new delivery van for use in the business is the purchase of a non-current asset, which will be used on a long-term basis. As such the purchase of the van – which is an example of capital expenditure – is entered on the debit side of van account.

•

Purchases returns (or returns out) is where we return goods to a trade payable (supplier). The returns transaction is recorded the opposite way round to a purchases transaction. Sales returns (or returns in) is where a trade receivable (customer) returns goods to us. The transaction is recorded the opposite way round to a sales transaction.

Cash Account

£ 115 180

Dr 20-3 10 Jun

Cr £ 90

Purchases Purchases

£

Dr 20-3 17 Jun

Cr £ 250

Cr £ 350 285

Sales Account

£

Cr £

3.7

20-3 2 Jun 23 Jun

Purchases Returns Account

Dr 20-3

Cr £

20-3

Designs Ltd

£ 100 250

Cr £

Cr £

20-2

Purchases Account

Dr 20-3

Dr 20-3 4 Jun 12 Jun 28 Jun

£ 25

20-3 26 Jun

Rent paid

Cr £ 125

•

4

Carriage inwards and carriage outwards are kept in separate accounts because they represent different transactions. Carriage inwards is where we pay the carriage cost of goods purchased to have them delivered to us. Carriage outwards is where we pay the carriage charge for goods we have sold, that is we have sold the goods to our customers as ‘delivery free’.

4.3

CHAPTER 4 Business documents 4.2

INVOICE

INVOICE

DEANSWAY TRADING COMPANY

JANE SMITH, FASHION WHOLESALER

The Model Office, Deansway, Rowcester, RW1 2EJ

Unit 21, Eastern Industrial Estate, Wyvern, Wyvernshire, WY1 3XJ invoice to

invoice to

Excel Fashions 49 Highland Street Longton Mercia LT3 2XL deliver to

invoice no account your reference

2451

date

today

The Card Shop 126 The Cornbow Teamington Spa Wyvernshire WY33 0EG deliver to

as above

p ro du ct code

d es cr ip ti on

Dresses Suits Coats

invoice no account your reference

8234

date

today

as above

q ua nt it y

5 3 4

terms 2.5% cash discount for full settlement within 14 days Net 30 days

u ni t price £

30.00 45.50 51.50

u ni t

each each each

t ot al

t ra de discount %

£

£

150.00 136.50 206.00

0.00 150.00 0.00 136.50 0.00 206.00

TOTAL

p roduct code

ne t

descriptio n

Assorted rubbers Shorthand notebooks Ring Binders

quantity

5 100 250

terms 2.5% cash discount for full settlement within 14 days Net 30 days

492.50

unit price £

5.00 4.00 0.50

unit

total

5

net

£

box 10 each

25.00 40.00 125.00

TOTAL

The Card Shop will pay £185.25 (£190.00 x 97.5%) for settlement in full within 14 days.

Excel Fashions will pay £480.18 (£492.50 x 97.5%, rounded down) for settlement in full within 14 days.

trade discount %

£

0.00 0.00 0.00

25.00 40.00 125.00

190.00

4.4

Dr 20-4 2 Feb 16 Feb

G Lewis G Lewis

Purchases Account £ 20-4 200 160

Sales Account £ 20-4 4 Feb 7 Feb

Dr 20-4

20-4 10 Feb 10 Feb 24 Feb 24 Feb

Bank Discount received Bank Discount received

£ 190 10 152 8 360

20-4 2 Feb 16 Feb

(a)

product code

L Jarvis G Patel

G Lewis

Dr

4.5

Cr £

description

quantity

unit price

unit

total

£

Cr £ 150 240

trade net discount %

£

£

45B

Trend tops (black)

30

12.50

each

375.00

10

337.50

35W

Trend trousers (white)

20

25.00

each

500.00

10

450.00

Cr Purchases Purchases

£ 200 160

360 terms L Jarvis

Dr 20-4 4 Feb

Sales

£ 150

20-4 12 Feb 12 Feb

Bank Discount allowed

150 G Patel

Dr 20-4 7 Feb

Sales

£ 240

20-4 20 Feb 20 Feb

Bank Discount allowed

240 Bank Account

Dr 20-4 12 Feb 20 Feb

L Jarvis G Patel

20-4 10 Feb 24 Feb

20-4

£

20-4 10 Feb 24 Feb

G Lewis G Lewis

G Lewis G Lewis

Discount Allowed Account

Dr L Jarvis G Patel

£ 3 6

20-4

£ 147 3 150

(b)

TOTAL

787.50

Trade discount is given, if prearranged:  –

to businesses, often in the same trade (but not to the general public)

Cr

 –

for buying in bulk (this discount is also known as bulk discount)

£ 234 6 240

 –

by wholesalers, as a discount off list price to retailers

Cash discount (also known as settlement discount) is given, for prompt payment, if prearranged, and indicated on the invoice (c)

Fashion Shop will pay £748.12 (£787.50 x 95%, rounded down) for settlement in full within 7 days.

(a)

A source document is used to update the book-keeping records.

(b)

(i)

An invoice is a source document prepared by the seller and states the value of goods sold and, hence, the amount to be paid by the buyer.

(ii)

A credit note is a source document which shows that the buyer is entitled to a reduction in the amount charged by the seller; it is used if:

Cr

Discount Received Account

Dr

20-4 12 Feb 20 Feb

£ 147 234

5% cash discount for full settlement within 7 days Net 30 days

Cr

£ 190 152

4.7

Cr £ 10 8

Cr

( c)

£

6

 –

some of the goods delivered were faulty, or incorrectly supplied

 –

the price charged on the invoice was too high

A ny th re e f ro m:  –

cheque counterfoils

 –

paying-in slip counterfoils

 –

cash receipts

 –

till rolls

 –

information from bank statements, such as standing orders, direct debits, BACS, credit transfers, bank charges

4.8

(a)

•

5 computer desks were ordered (not 10 as shown on the invoice)

•

10 office chairs were ordered (not 5 as shown on the invoic e)

•

the unit price of the computer desks is £65.00 each (not £70.00 as shown on the invoice)

•

the net amount for computer desks is £292.50 (not £350.00 as shown on the invoice)

Dr

•

the net amount for office chairs is £180.00 (not £20.00 as shown on the invoice)

•

the in voice total is £472.50 (not £370.00 as shown on the invoice)

20-9 1 Jan 11 Jan 12 Jan 22 Jan

Capital Sales Sales Sales

1 Feb 4 Feb 10 Feb 12 Feb 19 Feb 25 Feb

Balance b/d Sales Sales Rowcester College Sales Sales

CHAPTER 5 Balancing accounts – the trial balance 5.1 (a) and (c)

(b)

1 Mar

Bank Account

Balance b/d

20-9

1 Mar

£

1 Mar

Bank Bank Balance b/d

1 Feb 24 Feb (c)

Wyvern Products Limited will pay £448.87 (£472.50 x 95%) for settlement in full within 14 days.

1 Mar

7

2 Feb 15 Feb 27 Feb 28 Feb

Rent paid Shop fittings Comp Supplies Ltd Balance c/d

£ 500 500 1,000 1,000

Bank Bank Balance b/d

£ 1,500 850 2,350 2,350

20-9 1 Jan

Cr Bank

20-9 28 Feb

Balance c/d

Balance b/d Comp Supplies Ltd Balance b/d

£ 10,000

Cr £ 1,000 1,000

20-9 28 Feb

Balance c/d

Cr £ 2,350 2,350

Purchases Account

Comp Supplies Ltd Comp Supplies Ltd

£ 500 1,500 5,000 6,700 13,700 500 850 6,350 5,300

13,000

Shop Fittings Account

Dr 20-9 7 Jan 25 Jan

Rent paid Shop fittings Comp Supplies Ltd Balance c/d

Rent Paid Account

Dr 20-9 5 Jan 15 Feb

Cr

20-9 4 Jan 5 Jan 20 Jan 31 Jan

Capital Account

Dr

Dr 20-9 4 Jan 2 Feb

£ 10,000 1,000 1,250 1,450 13,700 6,700 1,550 1,300 750 1,600 1,100 13,000 5,300

£ 5,000 6,500 11,500

20-9 31 Jan

11,500 5,500 17,000 17,000

28 Feb

Cr Balance c/d

£ 11,500 11,500

Balance c/d

17,000 17,000

Dr

Comp Supplies Limited

20-9 20 Jan 31 Jan

Bank Balance c/d

5 Feb 27 Feb 28 Feb

Purchases returns Bank Balance c/d

£ 5,000 6,500 11,500 150 6,350 5,500 12,000

20-9 31 Jan

28 Feb

Purchases Purchases

1 Feb 24 Feb

Balance b/d Purchases

£ 5,000 6,500 11,500 6,500 5,500

1 Mar

Balance b/d

12,000 5,500

Sales Account

Dr Balance c/d

Balance c/d

£ 4,550

4,550 11,150

Cr

20-9 7 Jan 25 Jan

Bank Bank Rowcester College Bank

1 Feb 4 Feb 10 Feb 19 Feb 25 Feb 26 Feb

Balance b/d Bank Bank Bank Bank Rowcester College

11,150 1 Mar

Balance b/d

Dr £ 6,700

Name of Account  Bank Capital Rent paid Shop fittings Purchases Comp Supplies Limited Sales Rowcester College Sales returns

Cr

20-9 11 Jan 12 Jan 16 Jan 22 Jan

Trial balance as at 31 January 20-9

(b)

£ 1,000 1,250 850 1,450 4,550 4,550 1,550 1,300 1,600 1,100 1,050 11,150 11,150

Rowcester College

Sales

£ 850

20-9 27 Jan 31 Jan

10,000

6,500 4,550 750 100 21,050

21,050

Dr £ 5,300

Cr £

Trial balance as at 28 February 20-9

(d) Name of Account  Bank Capital Rent paid Shop fittings Purchases Comp Supplies Limited Sales Rowcester College Sales returns Purchases returns

Sales returns Balance c/d

850 1 Feb 26 Feb 1 Mar

Balance b/d Sales Balance b/d

Dr 20-9

12 Feb 28 Feb

Bank Balance c/d

Sales Returns Account

Dr 20-9 27 Jan

750 1,050 1,800 1,050

Rowcester College

£ 100

20-9

20-9 5 Feb

5.2

750 1,050 1,800

Cr

Comp Supplies Ltd

Cr

10,000

5,500 11,150 1,050 100 150

8

26,800

Cr £

1,250 850 48 730 144 1,442 2,704 3,200 90 1,174 1,500 6,000 9,566

£ 150

 

1,000 2,350 17,000

Trial balance of Jane Greenwell as at 28 February 20-1 Dr £ Name of account  Bank Purchases Cash Sales Purchases returns Trade payables Equipment Van Sales returns Trade receivables Wages Capital (missing figure)

£

Purchases Returns Account

£

Cr £ 100 750 850

 

500 1,500 11,500

26,800 Dr 20-9 16 Jan

Cr £

9,566

 

5.5

PURCHASES LEDGER

Four from: 

• 

Error of omission

Business transaction completely omitted from the accounting records. For example, cash sale omitted from both cash account and sales account. • 

Dr

Softseat Ltd

20-2

£

Reversal of entries

Debit and credit entries on the wrong side of the two accounts concerned. For example, cash sale entered wrongly as debit sales account, credit cash account. • 

• 

Transaction entered to the wrong person's account. For example, a sale of goods on credit to A T Hughes has been entered as debit A J Hughes' account, credit sales account.

Dr

Error of principle

20-2

Purchases Purchases

£ 320 160

PRK Ltd

£

20-2 2 Feb

Cr Purchases

£ 80

Error of original entry (or transcription)

Amount entered incorrectly in both accounts. For example, sale of £45 entered in both sales account and the trade receivable's account as £54. • 

Cr

Mispost/error of commission

Transaction entered in the wrong type of account. For example, cost of petrol for vehicles has been entered as debit motor vehicles account, credit bank account. • 

20-2 1 Feb 19 Feb

Quality Furnishings

Dr 20-2

Compensating error

£

Two errors cancel each other out. For example, balance of purchases account calculated wrongly at £10 too much, compensated by the same error in sales account.

20-2 15 Feb

Cr Purchases

£ 160

SALES LEDGER CHAPTER 6 Division of the ledger – the use of subsidiary books 6.2

Date

Details

Invoice

Reference

20-2

20-2 8 Feb 25 Feb

Amount

£

1 Feb

Softseat Ltd

961

2 Feb

High Street Stores

Dr

Purchases Day Book

(a)

Sales Sales

PRK Ltd

068

80

Quality Furnishings

529

160

19 Feb

Softseat Ltd

984

160

28 Feb

Total for month

720

Dr

Peter Lounds Ltd

20-2 14 Feb

£ 120

Sales

20-2 18 Feb

Sales Day Book Details

Invoice

8 Feb

Reference

Sales

001

Cr

20-2

£

£ 320

20-2

Cr £

Amount

£ High Street Stores

£

Carpminster College

Dr

20-2

Cr

20-2

320

15 Feb

Date

£ 440 200

GENERAL LEDGER

440

14 Feb

P eter Lounds Ltd

002

120

Dr

18 Feb

Carpminster College

003

320

25 Feb

High Street Stores

004

200

20-2 28 Feb

28 Feb

Total for month

Purchases Account

Purchases Day Book

£ 720

Cr

20-2

£

Sales Account

Cr

1,080 Dr 20-2

9

£

20-2 28 Feb

Sales Day Book

£ 1,080

6.3 (a) Date

Purchases Day Book Details

GENERAL LEDGER

Invoice

Reference

20-2 2 May

Amount  

20-2 31 May

£ M Roper & Sons

562

PL 302

190 200

Purchases Account

Dr

4 May

Wyper Ltd

82

PL 301

10 May

Wyper Ltd

86

PL 301

210

18 May

M Roper & Sons

580

PL 302

180

Dr

21 May

Wyper Ltd

91

PL 301

240

20-2

25 May

M Roper & Sons

589

PL 302

98

31 May

Total for month

Purchases Day Book

£ 1,118.00

Cr

20-2

£

Purchases Returns Account

£

20-2 31 May

Purchases Day Book

Cr £ 108.00

1,118.00

Purchases Returns Day Book Date

Details

Credit Note

Reference

Amount

82

PL 302

30

20-2

6.5

(a)

£

18 May

M Roper & Sons

23 May

Wyper Ltd

28 May

M Roper & Sons

31 May

Total for month

6

PL 301

40

84

PL 302

38

product

quantity

details

unit pric e

unit

X24

96

Trend tops

£8.50 each

each

Y36

20

Jeans

£15 each

each

total amount

c ode

108

(b) and (c)

816.00 300.00

PURCHASES LEDGER  

Dr 20-2 23 May 31 May

Purchases Returns Balance c/d

Wyper Ltd (account no 301) £ 20-2 40 1 May Balance b/d 710 4 May Purchases 10 May Purchases 21 May Purchases 750

1 Jun

Dr 20-2 18 May 28 May 31 May

Purchases Returns Purchases Returns Balance c/d

Cr £ 100 200 210 240 750

Balance b/d

710

M Roper & Sons (account no 302) £ 20-2 30 1 May Balance b/d 38 2 May Purchases 485 18 May Purchases 25 May Purchases 553

Cr £ 85 190 180 98 553

1 Jun

Balance b/d

terms

5% cash discount for full settlement within 7 days Net 30 days

485

10

1,116.00 trade discount 20%

223.20

total

892.80

(b)

(i)

Purchases day book

(ii)

Sale s day book

(i)

Trade discount:

CHAPTER 7 The main cash book 7.3 Cash Book

Dr (c)

Date

 – given for bulk buying (also known as bulk discount), or for being in the trade, or for regular customers

Details

Ref

20-7

 – deducted from the invoice before entry in the books

1 Aug Balances b/d 1 Aug Wild & Sons Ltd 11 Aug Bank

 – usually a larger percentage than cash discount (ii) Cash discount (also known as settlement discount):  – given for prompt payment

12 Aug A Lewis Ltd

 – not deducted until account is paid

21 Aug Harvey & Sons Ltd

 – can be disallowed if terms are not met

29 Aug Wild & Sons Ltd

 – usually a smaller percentage than trade discount

29 Aug Bank

Disc allwd £

Cash

Bank Date

£

£ 20-7

276 4,928 5 Aug 398 8 Aug 500 11 Aug

C

Subsidiary

Account to

Account to

Document

Book

be debited

be credited

Sales day book

V Singh

Sales

Ref

T Hall Ltd Wages Cash

261 22 Aug

Wages

595 25 Aug

J Jones

27 Aug

Salaries

28 Aug 29 Aug

Telephone Cash

£ 541

31 Aug

Balances c/d

500

F Jarvis

457 436 33

628 2,043 276 275

C

35 1,051 7,937 1 Sep Balances b/d

£

Bank

254

15 275

Cash

C

1,755 18 Aug

C

Disc recd £ 24

20

6.8

Source

Cr

Details

361 1,051

57

3,217 7,937

361 3,217

7.4

Invoice for goods sold on

Dr Date

credit to V Singh

(a)

20-5 1 Mar Balances b/d

Invoice received for goods bought on credit

Purchases day

from Okara Limited

book

Purchases

Cash Book

Details

Okaro Limited

3 Mar Sales*

(c)

Cash

Credit note issued to

Sales returns

Sales returns

S Johnson

S Johnson

day book

13 Mar Sales 22 Mar Bank

Credit note received

Purchases returns

Roper &

Purchases

25 Mar Sales 29 Mar Sales*

from Roper & Company

day book

Company

returns

31 Mar Hobbs Ltd 31 Mar Pratley & Co

Bank Date

100

950 1,680

C

150

C

Details

£ £ 20-5 106 3,214 2 Mar Rent

8 Mar Sales 11 Mar Bank

(b)

Ref Discount allowed £

150

5 Mar Cleaning expenses 9 Mar Purchases 11 Mar Cash

1,800 16 Mar Postages 18 Mar Telephone

2,108 20 Mar Stationery 200 2,000 22 Mar Cash 30 50

10674

Cr Ref Discount Cash Bank received £ £ £ 250 35

10675 10676

1,200 C

150 50

10677

168 128

10678

C

150

720 26 Mar Misc expenses 1,160 2 7 Mar Wages 10679

70 2,000

30 Mar Electricity 10680 31 Mar Evans & Co 10681

45

31 Mar A Bennett

26

10682

31 Mar Balances c/d 80 1 Apr Balances b/d *

11

706 13,632 423 8,259

106 855 494 423 8,259

71

706 13,632

An alternative way of showing the transactions of 3 March and 29 March is to record the full amount of sales in the debit cash column, and then to show the amount banked as a separate transfer, ie debit bank, credit cash.

7.6

DR Supplier/Trade payable

8.2

DR Bank

(a) Dr 20-7 1 Jan 13 Jan

CR Bank

Credit transfer for payment by a customer  Amounts paid directly into the bank by a trade receivable, who has the necessary bank code information.

(ii)

7.8

CHAPTER 8 Bank reconciliation statements

Standing order  Money paid out of the bank directly, at regular intervals, on the business’s order. Usually for the same fixed amount for goods and services supplied

(i)

1 Feb

CR Customer/Trade receivable

Cash Book (bank columns) £ p 20-7 Balance b/d 415.15 23 Jan Direct debit: Omni Finance BACS credit: T K Supplies 716.50 31 Jan Balance c/d 1,131.65 Balance b/d 923.70

Cr £ p 207.95 923.70 1,131.65

(a) and (b) P GERRARD BANK RECONCILIATION STATEMENT AS AT 31 JANUARY 20-7

(b) Cash Book

Dr

Date 20-6

Details

Disc £

1 Jan Balance b/d

Cash £

Bank £

50

6 Jan R Reed 4

Date 20-6

Details

366

27 Jan Wages

28 Jan Sales

642

20 Jan British Gas 248

C

1,319

3

S/O

1 Feb Balance b/d

1,444

50

2,500

Add: unpresented cheques

Bryant & Sons

cheque no. 001354

312.00

P Reid

cheque no. 001355

176.50 488.50 1,412.20

Less:  outstanding lodgement

200

G Shotton Limited

335.75

Balance at bank as per cash book

28 C

20-6 31 Jan

1,076.45

1,319

3

50

422

1,444

2,500

8.3

(a) Cash Book (bank columns)

Dr

422

20-7 1 May 7 May 16 May 23 May 30 May

Balance b/d Cash C Brewster Cash Cash

1 Jun

Balance b/d

£ 300 162 89 60 40

(c)

20-7 2 May 14 May 29 May 16 May 31 May 31 May

Cr

P Stone 867714 Alpha Ltd 867715 E Deakin 867716 Standing order: A-Z Insurance Bank charges Balance c/d

651 Discounts Allowed Account

Dr Cash book

£ 4

20-6

428

Cr £ JANE DOYLE

(b)

BANK RECONCILIATION STATEMENT AS AT 31 MAY 20-7

£ Balance at bank as per cash book Add: 

Dr 20-6

Discounts Received Account

£

20-6 31 Jan

Cash book

£ 923.70

450

31 Jan Balances c/d 4

Balance at bank as per cash book

75

21 Jan Bank interest 31 Jan Bank

£

Bank £

164

11 Jan Rent

752

31 Jan Cash

Cash £

1,236

2 Jan Bilton Office Supplies

14 Jan Sales

24 Jan C Denton & Co Ltd C/T

Disc £

1 Jan Balance b/d 567

13 Jan B Brown

Cr

Cr

unpresented cheque E Deakin cheque no. 867716

£ 3

428 110 538

Less: 

outstanding lodgement cash banked

Balance at bank as per bank statement

12

40 498

£ 28 50 110 25 10 428 651

8.5

(a)

(i)

8.7

Standing orders 

(a)

Credit Regular payments of the same amount made directly from the bank on behalf of the company on the order of the company. (ii)

Direct debits 

Credit Payments made from the bank for the customer collected by the payee on the order of the customer usually for changing amounts. (iii)

Cash Book

Dr

Date 2003

Credit transfers 

Debit or Credit Receipts from customers paid directly into the bank of the payee. Payments to suppliers or wages into the bank of the payee.

Details

Bank £ p

Credit transfer Balance c/d

Cash Book – Bank Account £ 540 Balance b/d 534 Standing order Direct debit Bank charges 1,074

Cheque number

Bank £ p

2,459.35

1 Nov

Banks Ltd

11346

134.37

√ 

3 Nov Toys for You

234.00

√ 

1 Nov

Books & Paints

11347

276.89

√ 

5 Nov B J Patel

3,219.00

√ 

10 Nov

Wages

11348

92.50

√ 

5 Nov Dolls and Things

1,142.00

√ 

12 Nov

Jones and Son

11349

3,781.95

√ 

23 Nov J A Smith Ltd

560.00

√ 

23 Nov

Smith and Son

11350

139.43

√ 

26 Nov Cash banked

340.00

25 Nov

HGF Finance

11351

256.00

25 Nov

Toy Designs

11352

1,245.98

30 Nov

Balance c/d

2,027.23

7,954.35

Cr £ 378 230 420 46 1,074

Balance b/d

Cr

Details

1 Nov Balance b/d

(b) Dr

Date 2003

30 Nov Balance b/d 9 Nov J Black Ltd

C/T

534

7,954.35

2,027.23

12 Nov

Business rates

S/O

547.90

246.98

18 Nov

Proper Ins Co

S/O

145.65

23 Nov

Bank charges

30 Nov

Balance c/d

45.89 1,534.77

2,274.21

1 Dec Balance b/d

2,274.21

1,534.77

A SMITH AND CO

(c)

BANK RECONCILIATION STATEMENT AS AT 31 MARCH 2001

£ Balance at bank as per cash book

£ (534)

Add: 

unpresented cheques

Less: 

o ut st an di ng lo dg em en t ( un cl ea re d b an ki ng s)

2 70

cheque query

265

JAMES JOLLY AND CO

(b)

469

BANK RECONCILIATION STATEMENT AS AT 30 NOVEMBER 2003

(65) £ Balance at bank as per cash book 535 Balance at bank as per bank statement

Add: 

(600)

£ 1,534.77

unpresented cheques HGF Finance

11351

256.00

Toy Designs

11352

1,245.98

Tutorial note: brackets indicate an overdraft

1,501.98 3,036.75 Less: 

outstanding lodgement cash banked

Balance at bank as per bank statement

13

340.00 2,696.75

9.7

CHAPTER 9 Introduction to final accounts

(a)

R MASTERS

(i)

INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2002

9.2

FINAL ACCOUNTS

TRIAL BALANCE

INCOME

£

BALANCE SHEET

STATEMENT Debit

Credit

Debit

(a) Salaries

 √ 

 √ 

(b) Purchases

 √ 

 √ 

(c) Trade receivables

 √ 

(d) Sales returns

 √ 

Credit

 √ 

£ Revenue Opening inventory Purchases

(ii) Dr 2002 31 Mar 31 Mar

£ 144,810

16,010 96,318 112,328 13,735

Less Closing inventory Cost of sales Gross profit Less expenses: Salaries Heating and lighting Rent and rates Sundry expenses Vehicle expenses

Details Drawings Balance c/d

Capital Account £ 2002 12,500 31 Mar 48,341 31 Mar 60,841

98,593 46,217

1 Apr

18,465 1,820 5,647 845 1,684

(b)

28,461 17,756

Profit for the year

BALANCE SHEET AS AT 31 DECEMBER 20-4 £ £ Non-current Assets Vehicles Office equipment

9.9

£

2001 1 Dec 31 Dec

18,600 12,140 5,820 14,375 29,695

2001 1 Dec 31 Dec

2001

14

48,341

£

p

Cr

2001 1 Dec 31 Dec

Details Balance b/d Monthly total

£ p 16,493.27 4,560.30

£ p 1,269.43 236.91

2001

Cr Details

£

Details

£

Purchases Account

Details Balance b/d Monthly total

£ p 10,276.41 2,769.56

2001

Details

£

p

2001 1 Dec 31 Dec

p

Cr

Returns Outwards Account

Dr

25,250 17,756 43,006 13,311 29,695

Balance b/d

Returns Inwards Account

Details Balance b/d Monthly total

Dr

17,960 Net Current Assets or Working Capital NET ASSETS

Details

Dr

13,735

Cr £ 36,790 24,051 60,841

Sales Account

Dr 2001

32,335 Less Current Liabilities Trade payables Bank overdraft

(a)

Details Balance b/d Profit for the year

Two from:  – increased by profit  – more capital introduced  – reduced by losses  – reduced by drawings

9,820 5,500 15,320

Current Assets Inventory Trade receivables

Less Drawings

32,530 24,051

Profit for the year

 √ 

CLARE LEWIS INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20-4

FINANCED BY Capital Opening capital Add Profit for the year

23,980 3,600 4,500 450

 √ 

 √ 

(g) Capital

Less expenses: Wages Carriage outwards Motor expenses Bank charges

 √ 

 √ 

(f) Vehicle

9.5

Debit

 √   √ 

(e) Discount received

Credit

£ 56,231 350 56,581

Gross profit Add Discount received

p

Cr Details Balance b/d Monthly total

£ p 1,039.41 127.50

AMARYLLIS TRADING

(b)

INCOME STATEMENT FOR THE THREE MONTHS ENDED 31 DECEMBER 2001

£

£

Revenue Less Returns inwards Less Cost of sales: Opening inventory Add Purchases Less Returns out

Reason:

Short-term liabilit y  – which needs to be paid within the next 12 months

Tutorial note: the accounting treatment for a bill which has not been paid at the balance sheet date – called an accrual of expenses – is covered in detail in Chapter 12

11,879.06 871.26 15,311.19 2,640.96

4.

D ra wi ng s f or t he ye ar Section:

Capital/Financed by/Represented by

Reason:

It is cash or goods taken out of the business by the owner, therefore it reduces the capital invested in the business.

12,670.23 6,877.00

Gross profit

Cost of sales Goods available for sale Net revenue

£12,670.23 £15,311.19 £19,547.23

CHAPTER 10 The general journal and correction of errors 10.2

(a) Date

9.10

Current liabili tie s  – an amount owed by the business

13,045.97 1,166.91

Less Closing inventory

(i) (ii) (iii)

Telephone bil l due to be paid in one month’s time Section:

2,560.87

Add Carriage in

(c)

3.

£ 21,053.57 1,506.34 19,547.23

Details

Reference

20-8

MEMORANDUM

31 Dec

Inventory

GL GL

Date

Today

Income statement

To

Mary Arbuthnot, proprietor of Mary’s Doll Shop

Inventory valuation at 31 December 20-8 

From

Financial Accounting Student

transferred to income statement 

Subject

Balance sheet queries

Dr

Cr

£

£

22,600 22,600

(b) 1.

C os t o f n ew de li ve ry va n

Date

Section:

Non-current assets

20-8

Reason:

An asset purchased for use in the business

31 Dec

Details

Reference

Income statement

GL

 – not for resale

Telephone expenses

GL

 – used over a long period/more than one year

Transfer to income statement 

 – will help generate profits

of expenditure for the year 

Dr

Cr

£

£

890 890

 – will depreciate with use  – is a tangible asset 2.

(c)

Inventory of dolls for resale

Date

Section:

Current assets

20-8

Reason:

An asset remaining in the business for the short-term

31 Dec

 – less than one year  – the business is expected to sell them shortly

Details Drawings

GL

Motoring expenses

GL

Transfer of private motoring to  drawings account  continued 

15

Reference

Dr

Cr

£

£

200 200

(d) Date

(c) Details

Reference

20-8 31 Dec

Drawings

GL

Purchases

GL

Dr

Cr

£

£

Date

175 175

error of principle 

Details

Reference

Delivery van

GL

Vehicle expenses

GL

Dr

Cr

£

£

10,000 10,000

Goods taken for own use  by the owner 

Correction of error – vehicle no ............ invoice no ...............

(e) Date

Details

Reference

20-8 31 Dec

Bad debts written off

GL

N Marshall

SL

Dr

Cr

£

£

(d)

125

Date

reversal of entries 

Details

Reference

125 Postages

GL

Account of N Marshall written off as a

Bank

GL

bad debt - see memo dated ...................

Postages

GL

Bank

GL

Dr

Cr

£

£

55 55 55 55 110

110

Dr

Cr

£

£

Correction of reversal of entries  on ................... 10.4

(a)

error of omission 

(e) Date

Details

Reference

J Rigby

SL

Sales

GL

Dr

Cr

£

£

Date

compensating error 

Details

Reference

150 150

Purchases

GL

Purchases returns

GL

100 100

Sales invoice no ............. omitted from  the accounts.

Correction of under-cast on purchases  account and purchases returns account  on .......(date).......

(b) Date

(f)

mispost/error of commission 

Details

Reference

H Price Limited

PL

H Prince

PL

Dr

Cr

£

£

Date

125 125

Correction of mispost – cheque no .....: 

error of original entry 

Details

Reference

L Johnson

SL

Bank

GL

Bank

GL

L Johnson

SL

Dr

Cr

£

£

98 98 89 89 187

to H Price Limited  Correction of error – cheque for £89  received on ....(date)....

16

187

10.6

(a)

Two from:  – trial balance  – bank reconciliation statement  – control accounts (see Chapter 11)

(c) Error

An error of principle has occurred.

Account

(1)

Sales

Dr

Cr

£

£

(2)

3

A cheque has been debited in the cash book as £150 but credited in the customer’s account as £105.

3

270

Returns inwards

500

Suspense

500

Returns inwards

10.10

300

Suspense

(3)

3

An invoice has been completely omitted from the books.

270

Suspense

(a)

Suspense

Suspense Account

Dr 300

Date 2004

400

Discount received

30 Apr

400

Details

Balance per T/B

£

Date 2004

450

30 Apr 30 Apr

Cr Details

Sales Rent paid

450 (4)

No

3

The sales account has been totalled incorrectly.

JOURNAL

(b)

Yes

J Jones

£

200 250 450

350

A Jones

350

Tutorial note: The mispost between J Jones and A Jones needs to be corrected in the sales ledger,

but has no effect on suspense account. Tutorial notes: 10.8

(a) and (b) H G PATEL: TRIAL BALANCE AS AT 30 APRIL 2003 Account

Wages Administration costs Capital Property Motor vehicles Motor expenses Purchases Revenue (Sales) Returns outwards Carriage inwards Carriage outwards Discount received Drawings Suspense TOTAL

Dr

Cr

£ 23,890 6,000

£

•

Error (2) is an error of original entry which affects both the debit and credit side of the trial balance by the same amount, and will not be revealed by the trial balance. Such an error is not entered in the suspense account.

•

Error (3) has been entered in the suspense account, above, as the net amount of £250 (ie £650 – £400); as an alternative, it could have been entered as

60,000 65,000 5,000 1,650 38,900

(b) 98,000 3,698

367 450 2,135

(c)

6,900 15,676 163,833

163,833

17

 –

debit £400 (to take out the old amount in rent paid account)

 –

credit £650 (to enter the correct amount in rent paid account)

Error of commission (or mispost): •

example – payment to A Brown entered to B Brown’s account

•

explanation – although the entry has been misposted to the wrong person’s account, the trial balance will still balance because the entry has been made on the correct side of the account.

Sales ledger control account (see Chapter 11)

10.11

Jonathon Smith Corrected Profit for the year ended 30 November 2004

(b) Dr

Sales Ledger Control Account

20-8

£

Cr

20-8

£ p

Balances b/d

2,012.43

28 Feb

Sales returns

221.67

Credit sales

1,288.76

28 Feb

Cheques received from trade receivables

911.43

280

28 Feb

Cash discount allowed

less

2,500

28 Feb

Set-off: purchases ledger

add

9,500

28 Feb

Bad debts written off

28 Feb

Balances c/d

Profit calculated by Jonathon

1 Feb

£ p

26,790

1.

Sales undercast

add

450

2.

Discount allowed (2 x £140)

less

3.

Wages

4.

Non-current asset

5.

Error of commission – no effect on profit

6.

Closing inventory (reduction in cost of sales)

add

Corrected profit

28 Feb

 

34,060

1 Mar

Balances b/d

59.28 1,720.76

3,301.19

100

23.37 364.68

3,301.19

1,720.76

CHAPTER 11 Control accounts 11.3

SALES LEDGER

(a)

(c) Dr 20-8 1 Feb 3 Feb

Balance b/d Sales

1 Mar

Balance b/d

Dr 20-8 1 Feb Dr 20-8 1 Feb 3 Feb

Dr 20-8 1 Feb 17 Feb 1 Mar

Balance b/d

Balance b/d Sales

Balance b/d Sales Balance b/d

Dr 20-8 1 Feb 17 Feb

Balance b/d Sales

1 Mar

Balance b/d

Arrow Valley Retailers £ p 20-8 826.40 20 Feb Bank 338.59 20 Feb Discount allowed 28 Feb Balance c/d 1,164.99

Cr £ p 805.74 20.66 338.59 1,164.99

Mereford Manufacturing Company £ p 20-8 293.49 24 Feb Sales returns 127.48 28 Feb Set-off: purchases ledger 420.97 Redgrove Restorations £ p 20-8 724.86 7 Feb Sales returns 394.78 28 Feb Balance c/d 1,119.64

Cr £ p 59.28 Cr £ p 56.29 364.68 420.97

11.5

Cr £ p 165.38 954.26 1,119.64

Purchase Ledger Control Account

Dr 2001 1 Mar 31 Mar

954.26 Wyvern Warehouse Limited £ p 20-8 108.40 15 Feb Bank 427.91 15 Feb Discount allowed 28 Feb Balance c/d 536.31

1 Feb ru ary 20 -8 £ p 826.40 59.28 293.49 724.86 108.40 2,012.43

Arrow Valley Retailers B Brick (Builders) Limited Mereford Manufacturing Company Redgrove Restorations Wyvern Warehouse Limited Sales ledger control account 

338.59 B Brick (Builders) Limited £ p 20-8 59.28 28 Feb Bad debts written off

Reconciliation of sales ledger control account with trade receivable balances

Balance b/d Returns Set-off: sales ledger Discounts Cash paid Balance c/d

Balance b/d Cr £ p 105.69 2.71 427.91 536.31

£ 465 4,679 475 3,674 236,498 24,742 270,533 749

2001 1 Mar 31 Mar

Balance b/d Purchases Cash refunds Balance c/d

28 Feb ru ary 20 -8 £ p 338.59 – – 954.26 427.91 1,720.76

Cr £ 23,437 245,897 450 749

270,533 Balance b/d

24,742

Tutorial note: The cash purchases figure of £25,679 is not shown in the control account because it does not involve the accounts of trade payables – it is a cash purchase (ie debit purchases; credit bank/cash)

427.91

18