Leech has recently gone into business selling office chairs. Details of her transactions for the first month are given below.

Day 1 Opened a bank account and paid in £5000 of her own money.

Transferred the ownership of her car to the business at an agreed price of £2000.

Rented an office/showroom at a rental of £120 per month and paid one month's rent.

Bought a desk, typewriter, answer-phone and sundry office equipment at a cost of £800.

Day 2 Bought 100 chairs at a price of £35 per chair and paid for them immediately.

Day 3 Received delivery of the chairs.

Day 5 Placed advert in trade paper offering the chairs for sale on the following terms.

Single chairs Ten or more chairs

£50 per chair including delivery

£45 per chair including delivery The advert cost £200 and was paid for immediately.

Day 8 Received separate orders for 12 chairs at £50 each together with accompanying cheques.
Day 9 Paid the cheques into the bank and despatched the chairs. The delivery costs were £72 in total and were paid straightaway.
Day 11 Received six orders for ten chairs each at a cost of £45 per chair together with six cheques for £450.
Banked the cheques and despatched the orders. The delivery charges were £50 for each order making a total of £300 which was paid immediately.
Day 14 Leech paid herself two weeks' wages from the business, amounting to £150 in total.
Day 16 Bought another 20 chairs for £35 each and paid for them immediately.
Day 21 Paid £150 for car repairs.
Day 23 Rec~ived an order for 20 chairs at £45 each; banked the cheque and arranged delivery for £40 whch was paid for immediately.
Day 24 Placed a further advert in the trade paper at a cost of £200 which was paid for immediately.
Day 27 Received one order for 15 chairs at a price of £45 each (this order totalled £675) and another order for seven chairs at a price of £50 each (a total of £350). The cheques were banked and the chairs were despatched at a total cost of £100 which was paid immediately.
Day 28 Drew another £150 from the bank for her own wages.
Sold the remaining six chairs at a price of £250 for all six to a customer who walked into the showroom. The customer paid the £250 in cash and this money was banked. No delivery costs were incurred as the customer took the chairs away.
Paid the telephone bill of £30 and the electricity bill, £40.

(a) In each situation where there are two possible treatments discuss the arguments in favour of and against each alternative.

(b) Based on the outcome of your discussions draw up a worksheet and enter the above transactions.

(c) Extract a balance sheet at the end of the month and a profit and loss account for the month.

(d) Discuss the performance of the business for the period as revealed by the accounts you have prepared, paying particular attention to its cash position and its profitability.