Question 1

Read the case study ?Wi R Tools? below and answer the questions which follow.

Wi R Tools

Until recently, Winston Roberts has worked as a successful local handyman for a number of years and has developed a loyal clientele. Unfortunately, he is now finding physical activity more difficult and recently decided to invest some of his savings in a new, small retail business which would take advantage of his valuable experience, contacts and knowledge. Two and a half months ago, on Tuesday 1 July 20X1, Winston opened to the public a small shop called ?Wi R Tools? which sells tools and home improvement hardware as well as hires tools out. Most of Winston?s business has been for cash but he has given credit to a few customers he knows well. Winston has also taken advantage of the offer of credit from 2 wholesalers.

Winston is not computer literate and only keeps the minimum of financial records he thinks are needed to run his business and honour his legal responsibilities. He uses a small exercise book in the shop to record all financial transactions except for cash sales which are recorded on till slips generated by a cash register. Winston makes payments either by cash or by cheques drawn on his business bank account. He makes all his cash payments from his cash float as he does not keep a petty cash account. On Saturdays after closing the shop, starting from the 12 July 20X1, Winston totals up the till slips (cash register receipts) for the week. He then deposits his week?s cash received (net of his week?s cash payments) into his business bank account, ensuring he always retains a cash balance of 200 in the shop at the start of the following week.

Winston has a daughter, Jackie, who has recently been awarded a Professional Certificate in Accounting from a leading UK university. Jackie is about to start a training contract with an accounting practice in order to complete her professional qualification, but currently has time available to help her father run his business. Jackie has offered to produce double-entry bookkeeping records for Winston on Excel. She has convinced her father of the importance of using double-entry bookkeeping in order to produce ?true and fair? accounts. Winston is aware that he only needs to provide accounts once a year for tax purposes but thinks it might be a good idea to produce final accounts for the first two months of his new business so that he can assess how ?Wi R Tools? is progressing.

Jackie has gone through all of Winston?s records in fine detail and has produced the following list of the financial records of ?Wi R Tools? for its first two months of trading.

DateAccounting transactions

1.7.20X1Opened business bank account and paid in 8,000 of own money.

Introduced 200 of own money as opening cash balance to be kept in the shop.

Introduced own second-hand tools into the business. Those tools with a cost value of 800 were allocated for hire, while those with a cost value of 700 were allocated as tools for resale.

Bought, by cheque, hardware for resale: 995.

Bought, by cash, stationery: 40.

Bought, by cheque, tools for resale: 1,800.

Bought tools for resale from Berry Ltd on credit: 600.

Bought tools for hire from Avon plc on credit: 650.

2.7.20X1Paid, by cheque, 900 for rent for the first 3 months.

Bought, by cheque, a cash register: 182.

Bought, by cheque, insurance for the year: 408.

3.7.20X1Jim Moody opened a credit account and hired tools: 95.

Rosette Jakes opened a credit account and bought tools: 140.

9.7.20X1Bought, by cash, tea, coffee and biscuits for personal use for 7

12.7.20X1Cash sales from 1.7.20X1 to 12.7.20X1: tools, 100, and hardware, 90.

Cash hires from 1.7.20X1 to 12.7.20X1: 140

Deposited cash balance in bank account less 200 cash float kept in shop.

16.7.20X1Patricia Sim opened a credit account and hires a tool: 35.

Paid 150 for repairs to his home washing machine out of the business bank account

18.7.20X1Gave a customer a cash refund of 25 for a faulty tool they had purchased.

19.7.20X1Cash sales for week ending 19.7.20X1: tools, 72, and hardware, 60.

Cash hires for week ending 19.7.20X1: 140

Deposited cash balance in bank account less 200 cash float kept in shop.

26.7.20X1Cash sales for week ending 26.7.20X1: tools, 67, and hardware, 50.

Cash hires for week ending 26.7.20X1: 120.

Deposited cash balance in bank account less 200 cash float kept in shop.

30.7.20X1Paid, by cash, 23 for window cleaning

31.7.20X1Returned faulty tool which had been bought for 20 to Berry Ltd.

Paid, by cash, postage: 7.

2.8.20X1Cash sales for week ending 2.8.20X1: tools, 76 and hardware, 57.

Cash hires for week ending 2.8.20X1: 107.

Deposited cash balance in bank account less 200 cash float kept in shop.

4.8.20X1Paid, by cash, 45 for advertisements in local free newspaper.

5.8.20X1Paid, by two cheques, the amounts owing to Berry Ltd and Avon plc.

6.8.20X1Received payment, by cheque, of 125 from Rosette Jakes

7.8.20X1Received cash payment of 35 from Patricia Sim and hired tool for 22 to her on credit.

9.8.20X1Cash sales for week ending 9.8.20X1: tools, 197, and hardware, 90.

Cash hires for week ending 9.8.20X1: 160.

Deposited cash balance in bank account less 200 cash float kept in shop.

11.8.20X1Paul Okia opened an account and bought tools: 75.

16.8.20X1Nancy Gumid opened an account and hired tools: 35.

Cash sales for week ending 16.8.20X1: tools, 86, and hardware, 84.

Cash hires for week ending 16.8.20X1: 152.

Deposited cash balance in bank account less 200 cash float kept in shop.

23.8.20X1Cash sales for week ending 23.8.20X1: tools, 202, and hardware, 146.

Cash hires for week ending 23.8.20X1: 122.

Deposited cash balance in bank account less 200 cash float kept in shop.

26.8.20X1Paul Okia returned tool which had been sold to him on credit for 31.

27.8.20X1Paid, by cash from business cash float, 55 for lunch out with family.

30.8.20X1Cash sales for week ending 30.8.20X1: tools, 112, and hardware, 81.

Cash hires for week ending 30.8.20X1: 198.

Deposited cash balance in bank account less 200 cash float kept in shop.

31.8.20X1The shop was closed on the last day of the trading period 1.7.20X1 to 31.8.20X1. Winston did a stock take and calculated that the stock value of tools was 2,224 and that of hardware was 423. He took gas and electricity readings and estimated that the business used 73 worth of heat and light in the two months ending 31.8.20X1. Finally, Winston also decided that all fixed assets would have an estimated useful life of 4 years and no estimated residual value. Depreciation on all fixed assets will be provided on the straight line method.

After a careful look at her father?s business - as well as some lively discussions ? Jackie has designed a double-entry system using worksheets that she believes would best suit the accounting and bookkeeping requirements of ?Wi R Tools?. At the centre of the system is an account which would combine both the bank account and the cash account. Jackie decided to call this account a cash book, as her father was familiar with this term, which would serve as a book of prime entry as well as a nominal ledger account.

Jackie?s task now is to transfer all the financial records in her list above into the worksheets she has set up and which could be linked using appropriate formula.

Required

a)Using the Excel file you created called B190 ECA Qu 1 spreadsheet ans PI followed by your PI number, complete the following tasks in the spreadsheet templates provided:

WARNING: ONLY INSERT INFORMATION INTO APPROPRIATE BLANK CELLS IN THE SPREADSHEET TEMPLATES. DO NOT MAKE ANY CHANGES TO ANY OTHER CELLS.

i) In worksheet 1 of the file, entitled Books of Prime Entry (containing the cash book and the various day books), use the template provided to complete the books of prime entry (excluding the journal) for all relevant transactions for Wi R Tools between the 1/7/20X1 and 31/8/20X1. (13 marks)

ii) In worksheet 2 of the file, entitled Journal, use the template provided to complete the two journal entries for the first day of business, 1/7/20X1. (2 marks)

iii) In worksheet 3 of the file, entitled Personal Ledger Accounts, use the template provided to complete the personal ledger accounts for Wi R Tools between the 1/7/20X1 and 31/8/20X1. (All balances should be brought down to 1/9/20X1.) (5 marks)

iv) In worksheet 4 of the file, entitled Nominal Ledger Accounts, use the template provided to complete the nominal ledger accounts for Wi R Tools between the 1/7/20X1 and 31/8/20X1. (Ignore closing adjustments at this stage. All income and expense accounts, except ?Rent? and ?Insurance?, should be closed off to the profit and loss account and all relevant balances should be brought down to 1/9/20X1.) (10 marks)

v) In worksheet 5 of the file, entitled Trial Balance, use the template provided to extract the trial balance as at 31/8/20X1from the Nominal Ledger accounts prepared in iv) above. (You will need to include the balances you have transferred to the profit and loss account as well as the existing balances on the ?Rent? and ?Insurance? accounts.) (2 marks)

vi) In worksheet 2 of the file, entitled Journal, use the template provided to complete the journal entries for the period between 1/7/20X1 and 31/8/20X1. (All the information required is given in the last date (i.e. 31.8.20X1) of Jackie?s summary of the financial records, but a detailed working, in the form of an appropriate Excel formula, needs to be inserted into each of the three cells marked with double asterisks (**).) (10 marks)

vii) In worksheet 6 of the file, entitled Adjusted Nominal Ledger, use the template provided to complete the adjusted nominal ledger accounts for Wi R Tools between the 1/7/20X1 and 31/8/20X1. (All relevant accounts, including the profit and loss account, should be closed off. All relevant balances should be brought down to 1/9/20X1.) (6 marks)

viii) In worksheet 7 of the file, entitled Closing NL Balances, use the template provided to extract the closing nominal ledger balances as at 31/8/20X1. (2 marks)

ix) In worksheet 8 of the file, entitled Profit and Loss Account, use the template provided to complete the profit and loss account for Wi R Tools for the two months ended 31/8/20X1. (3 marks)

x) In worksheet 9 of the file, entitled Balance Sheet, use the template provided to complete the balance sheet for Wi R Tools as at 31/8/20X1. (3 marks)

b) Using the word document you created called B190 ECA Qu 1 and 2 answers PI followed by your PI number, complete the following tasks:

i) Explain to Winston what is meant by depreciation in accounting, and outline how depreciation should be treated in the final accounts of Wi R Tools. (5 marks)

ii) Winston does not appear to have carried out a bank reconciliation for the period ended 31 July 20X1. Explain to Winston what a bank reconciliation is and persuade him of its importance. (4 marks)

Total for Question 1: 65 marks

Question 2

Read the case study ?Henrikson Ltd? below and answer the questions which follow.

Henrikson Ltd

Henrikson Ltd sells exclusive kitchen appliances in a fashionable area of a large UK city. The business has been incorporated for three years. The sole director of the business, Peter Henrikson, also owns 75% of the shares of the company while his father, Paul Henrikson, owns the balance of the share capital. Peter keeps his own financial records using spreadsheets and gives a draft trial balance to his professionally qualified accountant and friend, Amy Reynolds, who finalises the accounts and ensures that all the legal and regulatory responsibilities of the company are met.

Amy is currently semi-retired from work as an accountant but still does the minimum continuous professional development to keep her status as a professionally qualified accountant. Much of Amy?s time currently is writing the final draft of an accounting textbook based on business case studies that Amy is familiar with. Amy is a member of a professional accounting body that signs up to the IFAC Code of Ethics for Professional Accountants.

Below is Henrikson Ltd's Trial Balance as at 31 December 20X3

DrCr

Advertising8,250

Bank79,250

Long term loan at 5%54,000

Opening stock at 1 January 20X342,500

Retained profit at 1 January 20X372,685

Creditors134,080

Debtors221,870

Provision for doubtful debts2,400

Directors remuneration90,605

VAT liability13,205

Carriage out3,352

Cost of office equipment at 1 January 20X3121,500

Depreciation on office equipment at 1 January 20X357,501

Cost of showroom equipment at 1 January 20X3112,450

Depreciation on showroom equipment at 1 January 20X331,250

Office expenses16,462

Office salaries35,680

Purchases179,125

Sales488,568

Salesforce wages41,750

Sales expenses2,562

Rent and rates18,600

Heat and light4,733

Issued share capital (at 1 per share) 125,000

978,689978,689

During the last week of the financial year Peter has finalised the following further information:

Further information:

?The closing stock at 31 December 20X3 was 36,250.

?Bad debts of 2,670 needed to be written off at the year end.

?The provision for doubtful debts at the yearend was to be kept at 2% of debtors, net of bad debts.

?Depreciation of office equipment for the year ended 31/12/20X3 was 3,750.

?Depreciation of showroom equipment for year ended 31/12/20X3 was 2,265.

?Rent paid in advance as at 31/12/20X3 was 1,800.

?Sales expenses owing as at 31/12/20X3 were 746.

?Office expenses owing as at 31/12/20X3 were 1,850.

?As at 31/12/20X3, corporation tax of 4,750 was owing.

?Interest on the long term loan had not been accounted for as at 31/12/20X3.

?A final dividend of 1p per share was approved by the shareholders but unpaid as at 31/12/20X3.

Required

a) Using the Excel file you created called B190 ECA Qu 2 spreadsheet ans PI followed by your PI number, complete the following tasks in the spreadsheet templates provided.

i) In worksheet 1 of the file, entitled Extended Trial Balance, use the template provided to complete the debit and credit columns for ?Adjustments?, ?Profit and loss account? and ?Balance sheet? for Henrikson Ltd for the year ended 31/12/20X3. (15 marks)

(In worksheet 1, an asterisk (*) in a cell indicates that a figure needs to be inserted from the information given. In the two cells marked with double asterisks (**), a detailed working, in the form of an appropriate Excel formula, need to be inserted into each. In worksheets 2 and 3 below, figures need to be inserted into appropriate blank cells.)

ii) In worksheet 2 of the file, entitled Profit and Loss Account, use the template provided to complete the profit and loss account for Henrikson Ltd for the year ended 31/12/20X3. (4 marks)

iii) In worksheet 3 of the file, entitled Balance Sheet, use the template provided to complete the balance sheet for Henrikson Ltd for the year ended 31/12/20X3. (6 marks)

b) Using the word document you created called B190 ECA Qu 1 and 2 ans PI followed by your PI number, complete the following tasks:

i) Explain why the following have an interest in the published accounts of Henrikson Ltd:

?Paul Henrikson,

?the employees of Henrikson Ltd,

?HM Revenue & Customs,

?the creditors of Henrikson Ltd. (4 marks)

ii) Based on information given in the case study above, state the three fundamental principles of the IFAC Code of Ethics for Professional Accountants with which Amy would find it most difficult to comply. For each of these principles, explain why Amy might find compliance difficult. (6 marks)

Total for Question 2: 35 marks

Total for ECA: 100 mar

WiSh Tools Books of prime entry (excluding the journal) between 1/7/20X1 and 31/8/20X1 Cash book debit 1.7.20X1 1.7.20X1 12.7.20X1 12.7.20X1 12.7.20X1 12.7.20X1 Cash Capital Capital Sale of tools Sale of hardware Hire of tools Bank deposit 13.7.20X1 19.7.20X2 19.7.20X2 19.7.20X2 19.7.20X1 Bal b/d Sale of tools Sale of hardware Hire of tools Bank deposit 20.7.20X1 26.7.20X1 26.7.20X1 26.7.20X1 26.7.20X1 Bal b/d Sale of tools Sale of hardware Hire of tools Bank deposit 27.7.20X1 2.8.20X1 2.8.20X1 2.8.20X1 2.8.20X1 Bal b/d Sale of tools Sale of hardware Hire of tools Bank deposit 3.8.20X1 6.8.20X1 7.8.20X1 9.8.20X1 9.8.20X1 9.8.20X1 9.8.20X1 Bal b/d Debtors control account Debtors control account Sale of tools Sale of hardware Hire of tools Bank deposit 10.8.20X1 16.8.20X1 16.8.20X1 16.8.20X1 16.8.20X1 Bal b/d Sale of tools Sale of hardware Hire of tools Bank deposit 17.8.20X1 23.8.20X1 23.8.20X1 23.8.20X1 23.8.20X1 Bal b/d Sale of tools Sale of hardware Hire of tools Bank deposit 24.8.20X1 30.8.20X1 30.8.20X1 30.8.20X1 30.8.20X1 Bal b/d Sale of tools Sale of hardware Hire of tools Bank deposit 1.9.20X1 Bal b/d 200 125 105 150 200 780 540 82 60 140 200 1,022 915 79 50 120 200 1,364 1,315 76 62 107 200 1,760 1,678 35 195 110 155 200 2,373 2,033 86 84 152 200 2,555 2,433 202 146 122 200 3,103 2,833 128 111 208 200 3,480 3,158 Bank credit 7,000 1.7.20X1 Purchases of hardware 1.7.20X1 Postage, telephone & stationery 1.7.20X1 Purchases of tools 2.7.20X1 Rent 2.7.20X1 Fixed assets 180 2.7.20X1 Insurance 9.7.20X1 Drawings 12.7.20X1 Bank deposit 12.7.20X1 Bal c/d 7,180 1,785 16.7.20X1 Drawings 18.7.20X1 Sales of tools returns 19.7.20X1 Bank deposit 19.7.20X1 Bal c/d 82 1,867 1,717 26.7.20X1 Bank deposit 26.7.20X1 Bal c/d 49 1,766 1,766 30.7.20X1 Window cleaning 31.7.20X1 Postage, telephone & stationery 2.8.20X1 Bank deposit 2.8.20X1 Bal c/d 45 1,811 1,811 4.8.20X1 Advertising 125 5.8.20X1 Creditors control account 22 5.8.20X1 Creditors control account 9.8.20X1 Bank deposit 9.8.20X1 Bal c/d Cash Bank 895 50 2,950 930 200 420 10 180 540 780 25 82 915 1,785 7,180 150 1,717 1,022 49 1,315 1,867 1,364 30 7 45 1,678 1,766 1,760 45 1,811 1,766 1,811 275 400 295 2,033 1,578 295 2,253 1,578 16.8.20X1 Bank deposit 16.8.20X1 Bal c/d 2,373 122 2,433 122 1,700 1,700 23.8.20X1 Bank deposit 23.8.20X1 Bal c/d 2,555 270 2,833 1,700 270 1,970 1,970 27.8.20X1 Drawings 30.8.20X1 Bank deposit 31.8.20X1 Bal c/d 3,103 75 247 3,158 1,970 3,480 2,217 Total Purchases of tools 550 550 800 800 1,350 1,350 Fixed assets 247 2,217 2,217 2,253 1,700 1,970 2,217 Purchase day book Date Supplier 1.7.20X1 Berry Ltd 1.7.20X1 Avon plc 31.8.20X1 - Nominal ledger posting at period end Dr Purchases Fixed assets of tools Nominal ledger posting at period end Cr Creditors control account Creditors control account Sales day book Total Date 3.7.20X1 3.7.20X1 16.7.20X1 7.8.20X1 11.8.20X1 16.8.20X1 31.8.20X1 Customer Jim Moody Rosette Jakes Patricia Sim Patricia Sim Paul Okia Nancy Gumid Nominal ledger posting at period end 90 160 35 22 75 35 417 Dr Sales of tools Hire of tools 90 160 35 22 75 235 Debtors control account 35 182 Debtors control account Nominal ledger posting at period end Sales of tools Cr Purchase returns day book Total Date Supplier 31.7.20X1 Berry Ltd 31.8.20X1 28 28 Purchase of tools returns 28 28 Nominal ledger posting at period end Dr Creditors control account Nominal ledger posting at period end Cr Purchases of tools returns Sales returns day book Total Date Customer 26.8.20X1 Paul Okia 31.8.20X1 Sales of tools returns 31 31 31 31 Nominal ledger posting at period end Dr Sales of tools returns Nominal ledger posting at period end Cr Debtors control account Hire of tools WiSh Tools Journal Date 1/7/20X1 1/7/20X1 31/8/20X1 31/8/20X1 31/8/20X1 31/8/20X1 31/8/20X1 31/8/20X1 1 Debit Fixed assets Credit Capital Narrative: Part of initial capital introduced as part of opening fixed assets 2 Debit Purchases of tools Credit Capital Narrative: Part of initial capital introduced as part of purchases for sale 3 Debit (W1 below) Prepayment Credit Rent Narrative: Prepayment of rent paid for three months 4 Debit (W2 below) Prepayment Credit Insurance Narrative: Prepayment of insurance paid for twelve months 5 Debit Stock of tools (B/S) Credit Stock of tools (P&L) Narrative: Closing stock of tools as at 31/8/20X1 6 Debit Stock of hardware (B/S) Credit Stock of hardware (P&L) Narrative: Closing stock of hardware as at 31/8/20X1 7 Debit Heat and lighting Credit Accruals Narrative: Accrual for heat and lighting invoice not received 8 Debit (W3 below) Depreciation Credit Accumulated depreciation Narrative: Straight line depreciation for first two months Dr 1,500 Cr 1,500 2,950 2,950 620 620 71 71 1,988 1,988 526 526 78 78 6 6 Workings W1 The formula used to work out the answer in the cell E14 is based on the following: Prepayment = Payment x proportion of payment not matched to relevant accounting period = ** W2 The formula used to work out the answer in the cell E18 is based on the following: Prepayment = Payment x proportion of payment not matched to relevant accounting period = ** W3 The formula used to work out the answer in the cell E34 is based on the following: Straight line depr'tion on fixed assets for 2 months = ( (Cost - residual value) / expected useful life in years) x (2 months / 12 months) ** WiSh Tools Personal ledger accounts between 1/7/20X1 and 31/8/20X1 Purchase ledger debit 31.7.20X1Purchase returns day book 5.8.20X1 Bank 31.8.20X1Bal c/d Berry Ltd credit 28 1.7.20X1 Purchase day book 275 247 550 1.9.20X1 Bal b/d 550 debit 5.8.20X1 Bank 31.8.20X1 Bal c/d 550 247 Avon plc credit 400 1.7.20X1 Purchase day book 400 800 1.9.20X1 Bal b/d 800 800 400 Total of purchase ledger a/c balances 647 Sales ledger debit 3.7.20X1 Sales day book 1.9.20X1 Bal b/d Jim Moody credit 90 31.8.20X1 Bal c/d 90 90 90 90 debit 3.7.20X1 Sales day book 1.9.20X1 Bal b/d debit 16.7.20X1Sales day book 7.8.20X1 Sales day book 1.9.20X1 Bal b/d debit 16.8.20X1Sales day book 1.9.20X1 Bal b/d Patricia Sim credit 35 7.8.20X1 Cash 22 31.8.20X1 Bal c/d 57 22 Nancy Gumid credit 35 31.8.20X1 Bal c/d 35 35 Total of sales ledger a/c balances 226 35 22 57 debit 11.8.20X1 Sales day book 1.9.20X1 Bal b/d 35 35 Rosette Jakes credit 160 6.8.20X1 Bank 31.8.20X1 Bal c/d 160 35 Paul Okia credit 75 26.8.20X1 Sales returns day book 31.8.20X1 Bal c/d 75 44 125 35 160 31 44 75 WiSh Tools Nominal ledger accounts between 1/7/20X1 and 31/8/20X1 Balance sheet accounts (YOU ALSO NEED TO COMPLETE PROFIT & LOSS ACCOUNTS FROM CELL B33 FURTHER BELOW THIS WORKSHEET) Capital credit 1.7.20X1 1.7.20X1 1.7.20X1 11,650 1.7.20X1 11,650 1.9.20X1 debit 31.8.20X1 Bal c/d Bank Cash J1 J2 Bal b/d Fixed Assets credit 1,500 1,550 1,350 31.8.20X1 Bal c/d 4,400 4,400 7,000 200 1,500 2,950 11,650 11,650 debit 9.7.20X1 Cash 16.7.20X1 Bank 27.8.20X1 Cash 1.9.20X1 Bal b/d Drawings credit 10 150 75 31.8.20X1 Bal c/d 235 235 1.9.20X1 Bal b/d 1.9.20X1 Bal b/d Debtors control account credit 235 6.8.20X1 Bank 182 7.8.20X1 Cash 31.8.20X1 Sales returns day book 31.8.20X1 Bal c/d 417 226 debit 5.8.20X1 Bank 5.8.20X1 Bank debit 1.7.20X1 J1 2.7.20X1 Bank 31.8.20X1 Purchase day book Creditors control account credit 275 31.8.20X1 Purchase day book 400 31.8.20X1 Purchase day book debit 31.8.20X1 Sales day book 31.8.20X1 Sales day book 4,400 4,400 31.8.20X1 Purchase returns day book 31.8.20X1 Bal c/d 28 647 1,350 1.9.20X1 Bal b/d 235 235 125 35 31 226 417 550 800 1,350 647 Profit and loss accounts Sales of tools credit 12.7.20X1 19.7.20X1 26.7.20X1 2.8.20X1 9.8.20X1 16.8.20X1 23.8.20X1 30.8.20X1 1,208 31.8.20X1 1,208 debit 31.8.20X1 P&L a/c debit 18.7.20X1 Cash 31.8.20X1 Sales returns day book Cash Cash Cash Cash Cash Cash Cash Cash Sales day book Sales of tools returns credit 25 31 31.8.20X1 P&L a/c 56 debit 125 82 79 76 195 86 202 128 235 1,208 31.8.20X1 P&L a/c debit 56 56 31.8.20X1 P&L a/c debit 1.7.20X1 J2 1.7.20X1 Bank 31.8.20X1 Purchase day book debit 31.8.20X1 P&L a/c Purchases of tools credit 2950 7,000 1,350 31.8.20X1 P&L a/c 11,300 Purchases of tools returns credit Purchase returns 28 31.8.20X1 day book 28 debit 2.7.20X1 Bank Insurance (Not closed off yet to the P&L a/c) 420 31.8.20X1 P&L a/c 420 debit 1.7.20X1 Cash 31.7.20X1 Cash Postage, telephone & stationery credit 50 7 31.8.20X1 P&L a/c 57 debit 1.7.20X1 Bank Sales of hardware credit 12.7.20X1 19.7.20X1 26.7.20X1 2.8.20X1 9.8.20X1 16.8.20X1 23.8.20X1 728 30.8.20X1 728 Hire of tools credit 12.7.20X1 19.7.20X1 26.7.20X1 2.8.20X1 9.8.20X1 16.8.20X1 23.8.20X1 30.8.20X1 1,336 31.8.20X1 1,336 Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Sales Day Book Purchases of hardware credit 895 31.8.20X1 P&L a/c 895 105 60 50 62 110 84 146 111 728 150 140 120 107 155 152 122 208 182 1,336 895 895 11,300 11,300 28 28 debit 2.7.20X1 Bank Rent (Not closed off yet to the P&L a/c) credit 930 31.8.20X1 P&L a/c 930 930 930 Advertising 420 420 debit 4.8.20X1 Cash debit 30.7.20X1 Cash 57 57 45 31.8.20X1 P&L a/c 45 Window cleaning credit 30 31.8.20X1 P&L a/c 30 45 45 30 30 WiSh Tools Trial balance as at 31st August 20X1 Dr Capital Drawings Fixed assets Debtors control account Creditors control account Bank Cash Sales of tools Sales of hardware Sales of tools returns Hire of tools Purchases of tools Purchases of hardware Purchases of tools returns Rent Insurance Advertising Postage, telephone & stationery Window cleaning Cr 11,650 235 4,400 226 647 2,217 2,158 930 420 45 57 30 10,718 12,297 WiSh Tools Post trial balance adjustments to nominal ledger accounts as at 31 August 20X1 debit 2.7.20X1 Bank debit 31.8.20X1 J3 31.8.20X1 J4 1.9.20X1 Bal b/d debit 31.8.20X1 J6 1.9.20X1 Bal b/d debit 31.8.20X1 J7 debit 31.8.20X1 Bal c/d debit 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 31.8.20X1 Rent (New information required) credit 930 31.8.20X1 J3 31.8.20X1 P&L a/c 930 Prepayments (New account) (Balance Sheet) credit 620 70 31.8.20X1 Bal c/d 690 690 Stock of hardware (New account) (Balance sheet) credit 526 31.8.20X1 Bal c/d 526 526 Heat and light (New account) (P&L) credit 39 31.8.20X1 P&L a/c 39 Accumulated depreciation (New account) (Balance sheet) credit 200 31.8.20X1 J8 200 1.9.20X1 Bal b/d Profit and loss account (New account) credit Sales of tools returns 31.8.20X1 Sales of tools Purchases of tools 31.8.20X1 Sales of hardware Purchases of hardware 31.8.20X1 Purchases of tools returns Rent 31.8.20X1 Hire of tools Insurance 31.8.20X1 J5 Advertising 31.8.20X1 J6 Postage, telephone and stationery Window cleaning Heat and light Depreciation Capital - 620 310 930 690 690 526 526 39 39 debit 2.7.20X1 Bank Insurance (New information required) credit 420 31.8.20X1 J4 31.8.20X1 P&L a/c 420 Stock of tools (New account) (Balance sheet) debit credit 31.8.20X1 J5 1,988 31.8.20X1 Bal c/d 1,988 1.9.20X1 Bal b/d 1,988 Accruals (New account) (Balance sheet) debit credit 31.8.20X1 Bal c/d 78 31.8.20X1 J7 78 1.9.20X1 Bal b/d debit 31.8.20X1 J8 Depreciation (New account) (P&L) credit 6 31.8.20X1 P&L a/c 6 70 350 420 1,988 1,988 39 39 78 6 6 6 6 200 Capital (New information required) credit 1.7.20X1 Bank 1.7.20X1 Cash 1.7.20X1 J1 1.7.20X1 J2 31.8.20X1 Bal c/d 31.8.20X1 P&L a/c - debit 1.9.20X1 - Bal b/d - WiSh Tools Closing nominal ledger account balances at 31 August 20X1 Dr Cr Capital Drawings Fixed assets Accumulated Depreciation Stock of tools Stock of hardware Debtors control account Prepayments Bank Cash Creditors control account Accruals - - - WiSh Tools Profit and loss account for the two months ended 31 August 20X1 Sales less Cost of sales: Purchases Closing stock Gross profit Hire of tools (0) 0 0 less Expenses: Rent Insurance Advertising Postage, Telephone and Stationery Window Cleaning Heat and lighting Depreciation Net profit (0) 0 WiSh Tools Balance sheet as at 31 August 20X1 Cost Accumulated depreciation Fixed assets Net book value 0 Current assets Stock Debtors Prepayments Bank Cash 0 less Current liabiliites Creditors Accruals Net current assets Net assets (0) 0 0 Capital Capital introduced add Net profit 0 less Drawings Closing balance 0 Hendrix Ltd Extended trial balance at 31 December 20X3 Advertising Bank Long term loan at 5% Opening stock at 1 January 20X3 Retained profit at 1 January 20X3 Creditors Debtors Provision for doubtful debts Director's remuneration VAT liability Carriage out Cost of office equipment - at 1st January 20X3 Accumulated depreciation - office equipment Cost of showroom equipment - at 1st January 20X3 Accumulated depreciation - showroom equipment Office expenses Office salaries Purchases Sales Salesforce wages Sales expenses Rent and rates Heat and light Issued share capital (at 1) Trial balance Dr Cr 7,250 77,750 50,000 41,000 74,658 134,080 224,880 2,400 87,600 11,623 3,480 125,000 80,000 112,450 35,984 22,400 36,680 180,125 494,915 51,750 10,962 20,600 6,733 125,000 1,008,660 1,008,660 Adjustments Dr Balance sheet Dr Cr * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Further information - adjustments: Stock at 31 December 20X3 Bad debts written off in the period Change in provision for doubtful debts (W1) Depreciation charge for the period - office equipment Depreciation charge for the period - showroom equipment Prepayment - rent paid in advance at 31/12/20X3 Accrual - sales expenses due at 31/12/20X3 Accrual - office expenses due at 31/12/20X3 Corporation tax on profits for the year Interest due - 5% on long term loan at 31/12/20X3 Retained profit for the year * * * * * * * * * * * * * * * * * * * * - W1The formula required is based on the following: Change in provision for doubtful debts = Required provision for doubtful debts - existing provision for doubtful debts = ** Profit and loss account Dr Cr * Cr - * * * * * * * * - - - - Hendrix Ltd Profit and loss account for the year ended 31 December 20X3 Turnover Cost of sales (W1) Gross profit Selling and distribution costs (W2) Administrative expenses (W3) 0 (0) 0 Operating profit Interest Profit on ordinary activities before taxation Tax on profit on ordinary activities Profit for the period Workings 1. Cost of sales Opening Stock Add Purchases 0 0 0 Less Closing stock 0 2. Selling and distribution costs Carriage out Salesforce wages Sales expenses Depreciation of showroom equipment Advertising 0 3. Administrative expenses Office expenses Office salaries Director's remuneration Rent and rates Heat and light Depreciation of office equipment Bad debts written off Increase in provision for doubtful debts 0 Hendrix Ltd Balance sheet as at 31 December 20X3 Fixed assets Tangible assets (W1) Current assets Stock Debtors (W2) Cash at bank and in hand 0 Creditors: amounts due within one year (W3) Net current assets Total assets less current liabilities Creditors: amounts due after one year 0 0 0 Capital and reserves Called up share capital Retained profit (W4) 0 Workings 1. Tangible assets Net book value as at 1/1/20X3 Depreciation for sales distribution for year ended 31/12/20X3 Depreciation for administration for year ended 31/12/20X3 Net book value as at 31/12/20X3 0 2. Debtors Net debtors less provision for doubtful debts Prepayments 0 3. Creditors: amounts due within one year Creditors VAT Liability Accruals Interest due Tax due 0 4. Retained profit as at 31/12/20X3 Retained profit as at 1/1/20X3 Plus Retained profit for year ended 31/12/20X3 Retained profit as at 31/12/20X3 0