In order to help finance her way through university, Matisse sets up in business trading in small technology related products (covers for mobile phones and tablets, adapters, cables, memory sticks etc.). She plans to sell these items to other students.

1. On 1^st October, Matisse opens a separate bank account for her business transactions and pays in 1,300 that she had saved from a summer job plus 2,500 borrowed from her parents to help get the business started. She also purchases from wholesale suppliers 700 worth of items to sell and spends 450 on shelving and storage equipment which she expects to use for the business for the three years that she will be at university but which will have no value after that time. The inventory for resale and the storage equipment are paid for from the business bank account. Matisse begins selling items to other students the next day.

2.In the three months up to the end of December, further items are purchased from suppliers with a total cost of 5,200. Because of her regular purchases, one supplier agrees that some of these items, costing 800 and purchased on 10^th December, can be taken on payment terms of one month's credit.

3. As trading begins to expand Matisse feels that she could use more money to finance the expansion of her business and on 1^st November takes out a bank loan for 3000 at 6% per annum, payable quarterly in arrears.

4. To give a signal to her parents that she is being successful in business, Matisse uses 1000 of this money to repay part of the loan borrowed from her parents.

5. At the end of November, Matisse also pays a friend 800 for help with transport to collect products from the wholesale suppliers and general help with selling items and promises to pay the same again every two months for continued help.

6.Over the three months to the end of December sales generate 6,400 in cash. During this period Matisse takes 1,100 to contribute to her own personal expenses and the remainder is paid into the business bank account. Matisse also agrees to let some hard-up student friends take items with a sales value of 600 to use as Christmas presents, on the understanding that they will pay for these items when they return to university in January.

7. At 31^st December Matisse estimates that the items she still has available for sale cost a total of 1,700.

At the end of December Matisse wants to get a picture of how her business has been performing and asks for your help in preparing records for all of the above business. She has funds in the bank but is uncertain how her business is performing.

(d)As an extension record the transactions above using the Manchester Method and produce a trial balance.

I want to know at the (3) transaction,why credit 30 payable and debit 30 expense?