Malcolm provides the following information:

1. Malcolm purchases a delivery vehicle £12,650 on credit from Drest Motors.
2. Malcolm purchases goods for resale £542 on credit from S Unset.
3. He purchases fuel for his vehicle £35 cash.
4. He sells goods for cash £212.
5. Malcolm purchases goods for resale £239 on credit from S Unset.
6. He sells goods £360 on credit to Ovis.
7. Malcolm withdraws £50 cash for personal use.
8. He pays insurance premium £100 cash.

Required

Enter the transactions in Malcolm’s ledger.

Carry down any balances.

Extract a trial balance to check the accuracy of the entries.

The trial balance is made up of the balances extracted from the ledger. It summarises the balances.

If you consider the trial balances that have been prepared so far, you should see that a pattern has started to emerge:

Debit balances
■ Assets are always debit balances. Examples above are cash balances (an asset); debtors like Ursula (an asset) as she owes money to Sharon.
■ Expenses are always debit balances. Examples above are the balance on the rent account; the balance on the wages account; the balance on the purchases account.

Credit balances
■ Incomes and benefits are always credit balances. The example above is the balance on the sales account.
■ Liabilities are always credit balances. The examples above are Cath and Rocky – they are creditors – Sharon owes them money.
A trial balance will show balances thus:

Transcribed Image Text:

Debit balances Assets Expenses Credit balances Liabilities Incomes Benefits