Write up the ledger accounts in respect of the following transactions for Mr B:-

Jan-01 Commenced business with £10,000 introduced by Mr B.

Jan-02 Bought stock of 500 chocolate hearts for £2,500 cash.
Jan-03 Bought stock of 200 red roses on credit for £2,000.
Jan-04 Bought a delivery van for £1,000 cash.
Jan-05 Sold all the red roses for £3,000 cash
Jan-06 Sold 400 chocolate hearts for £5,000 on credit.
Jan-07 Paid a gas bill for £500 cash.
Jan-08 Took out a loan for £2,000.
Jan-09 Paid £1,500 to trade creditors.
Jan-10 Received £3,000 from debtors.

Suppose that there are no other transactions for the rest of January
Close the accounts at the end of January and prepare the trial balance
 cash A/c
Dr Cr Dr

Capital A/c
Dr Cr Dr

Purchases A/c
Dr Cr Dr
 gas A/c trade payables A/c
Cr Dr

Motor van A/c trade recievables A/c

Cr Dr

Sales A/c Loan A/c

Cr Dr
 trade payables A/c
Cr

trade recievables A/c

Cr

Loan A/c
Cr
 debit credit
cash
capital
purchases
gas
motor van
sales
payables
recievables
loan

TOTAL 0 0
 cash A/c
Dr Cr Dr

1-Jan capital 10000 2-Jan inventory 2500 7-Jan

5-Jan sales 3000 4-Jan motor van 1000
8-Jan loan 2000 7-Jan gas 500
10-Jan receivables 3000 9-Jan payables 1500
31-Jan balance c/d 12500
18000 18000
1-Feb balance b/d 12500

Capital A/c
Dr Cr Dr

31-Jan balance c/d 10000 1-Jan cash 10000 4-Jan

10000 10000
1-Feb balance b/d 10000 1-Feb

purchases A/c
Dr Cr Dr

2-Jan cash 2500

3-Jan payables 2000 31-Jan
 gas A/c trade payables A/c
Cr Dr

cash 500 31-Jan income st 500 9-Jan cash

31-Jan balance c/d

Motor van A/c trade recievables A/c

Cr Dr

cash 1000 31-Jan balance c/d 1000 6-Jan sales

1000 1000
balance b/d 1000
1-Feb balance b/d

Saless A/c Loan A/c

Cr Dr

5-Jan cash 3000 31-Jan balance c/d

income st 8000 6-Jan reciveables 5000
 trade payables A/c
Cr

1500 3-Jan inventory 2000

500
2000 2000
1-Feb balance b/d 500

trade recievables A/c

Cr

5000 10-Jan cash 3000

31-Jan balance c/d 2000
5000 5000
2000

Loan A/c
Cr

2000 8-Jan cash 2000

2000 2000
1-Feb balance b/d 2000
 debit credit
cash 12500
capital 10000
purchases 4500
gas 500
motor van 1000
sales 8000
payables 500
recievables 2000
loan 2000

TOTAL 20500 20500

 debit credit
cash 12500
capital 10000
purchases 4500
gas 500
motor van 1000
sales 8000
payables 500
recievables 2000
loan 2000

TOTAL 20500 20500

The gas bill paid on 7/1 covers the months of January and Februrary
Electricity consumed during the month is estimated at 500 and will be paid in Februrary
Prepare the adjusted trial balance

At the end of the month, inventory is valued at 500.

Prepare the income statement and the balance sheet
 debit credit
cash 12500
capital 10000
purchases 4500
gas 500
motor van 1000
sales 8000
payables 500
recievables 2000
loan 2000

TOTAL 20500 20500

The gas bill paid on 7/1 covers the months of January and Februrary
Electricity consumed during the month is estimated at 500 and will be paid in Februrary

At the end of the month, inventory is valued at 500.

Prepare the income statement

sales 8000
cogs -4000
gross profit 4000
gas expense -250
electricity expense -500
profits for the year 3250

ASSETS:
gas prepayment 250
motor van 1000
inventory 500
recievables 2000
cash 12500
TOT 16250

LIBAILITIES
electricity accrual 500
loan 2000
payables 500
EQUITY
capital 10000
retained earnings 3250
TOT LIAB & EQUITY 16250
 debit credit
cash 12500
capital 10000
purchases 4500
gas expense 250
gas prepayment 250
motor van 1000
sales 8000
payables 500
recievables 2000
loan 2000
electricity expense 500
electricity accrual 500
TOTAL 21000 21000

ill be paid in Februrary

 Let's continue the previous example adding the following adjustment:

a) The van has a useful life of 24 months and a residual value of 40.
Calculate the depreciation for January using the straight line method.
Adjust the trial balance and prepare the financial statements including this new information

b) how does your answer change if monthly depreciation is calculated using the reducing balance
method with a 20% monthly depreciation?

c) now let's suppose that the company sells the van at the of January for 900 for cash
Depreciation for the month is charged in full as in point b)
a) monthly depreciation 40

debit credit
cash 12500
capital 10000
purchases 4500
gas expense 250
gas prepayment 250
motor van 1000
sales 8000
payables 500
recievables 2000
loan 2000
electricity expense 500
electricity accrual 500
TOTAL 21000 21000

sales 8000
cogs -4000
gross profit 4000
gas expense -250
electricity expense -500
depreciation expense -40
profits for the year 3210

b) monthly depreciation 200

debit credit
cash 12500
capital 10000
purchases 4500
gas expense 250
 gas prepayment 250
motor van 1000
sales 8000
payables 500
recievables 2000
loan 2000
electricity expense 500
electricity accrual 500
TOTAL 21000 21000

sales 8000
cogs -4000
gross profit 4000
gas expense -250
electricity expense -500
depreciation expense -200
profits for the year 3050

c) monthly depreciation 200

sale price 900
NBV 800
gain on disposal of PPE 100

debit credit
cash 12500
capital 10000
purchases 4500
gas expense 250
gas prepayment 250
motor van 1000
depreciation expese 200
accumulated depreciation 200
sales 8000
payables 500
recievables 2000
loan 2000
electricity expense 500
electricity accrual 500

TOTAL 21200 21200

sales 8000
cogs -4000
gross profit 4000
gas expense -250
electricity expense -500
depreciation expense -200
operating profits 3050
gain on disponal of PPE 100
profit for the year 3150
 debit credit
cash 12500
capital 10000
purchases 4500
gas expense 250
gas prepayment 250
motor van 1000
depreciation expese 40
accumulated depreciation 40
sales 8000
payables 500
recievables 2000
loan 2000
electricity expense 500
electricity accrual 500

TOTAL 21040 21040

ASSETS:
gas prepayment 250
motor van 960
inventory 500
recievables 2000
cash 12500
TOT 16210

LIBAILITIES
electricity accrual 500
loan 2000
payables 500
EQUITY
capital 10000
retained earnings 3210
TOT LIAB & EQUITY 16210

debit credit
cash 12500
capital 10000
purchases 4500
gas expense 250
gas prepayment 250
motor van 1000
depreciation expese 200
accumulated depreciation 200
sales 8000
payables 500
recievables 2000
loan 2000
electricity expense 500
electricity accrual 500

TOTAL 21200 21200

ASSETS:
gas prepayment 250
motor van 800
inventory 500
recievables 2000
cash 12500
TOT 16050

LIBAILITIES
electricity accrual 500
loan 2000
payables 500
EQUITY
capital 10000
retained earnings 3050
TOT LIAB & EQUITY 16050

debit credit
cash 13400
capital 10000
purchases 4500
gas expense 250
gas prepayment 250
motor van 0
depreciation expese 200
accumulated depreciation 0
gain on disponal of PPE 100
sales 8000
payables 500
recievables 2000
loan 2000
electricity expense 500
electricity accrual 500
TOTAL 21100 21100

ASSETS:
gas prepayment 250
motor van 0
inventory 500
recievables 2000
cash 13400
TOT 16150

LIBAILITIES
electricity accrual 500
loan 2000
payables 500
EQUITY
capital 10000
retained earnings 3150
TOT LIAB & EQUITY 16150
 Company ABC Plc. sells computers, giving one year gurantee on its products.
1 During 2019, the company estimates that the cost of the gurantee on products sold at £ 5000
2 During 2020, repairs under the gurantee costed the company £ 3000
3 In 2020 ABC Plc. stop giving a gurantee, so it estimates that the provision is no longer needed

What is the effect of this events on the financial statements?

Company ASD Ltd. has the following doubtful debt provision at 31/12/2019:
1500 individual provision for a credit towards QWE Plc.
1000 individual provision for a credit towards ZXC Ltd.
4000 general provision
for a total doubtful debt provision of 6500
During 2020:
QWE paid back its debt in full
ZXC has gone bankrupt and ASD estimates that the credit is irrecoverable
a new receivable for 2000 is considered doubtful
the general provision at the end of 2020 is 3000.
 Company ABC Plc. sells computers, giving one year gurantee on its products.
1 During 2019, the company estimates that the cost of the gurantee on products sold at £ 5000
2 During 2020, repairs under the gurantee costed the company £ 3000
3 In 2020 ABC Plc. stop giving a gurantee, so it estimates that the provision is no longer needed

What is the effect of this events on the financial statements?

1 For 2019, a cost of 5000 in the income statement and a gurantee provision of the same amount on the balance
2 cash outflow for 3000, the guarantee provision is reduced to 2000
3 the provision is cancelled, profits for the year increase by 2000

Company ASD Ltd. has the following doubtful debt provision at 31/12/2019:
1500 individual provision for a credit towards QWE Plc.
1000 individual provision for a credit towards ZXC Ltd.
4000 general provision
for a total doubtful debt provision of 6500
During 2020:
QWE paid back its debt in full
ZXC has gone bankrupt and ASD estimates that the credit is irrecoverable
a new receivable for 2000 is considered doubtful
the general provision at the end of 2020 is 3000.
me amount on the balance sheet

simple method: more complicated method:

Provision at 31/12/2019 6500 Provision at 31/12/2019 6500
Provision at 31/12/2020 5000 amount used during the year -1000
amount reversed -1500
Changes in provision: -1500 new provisions 2000
(will increase profits as the provision is reduced) changes in the general prov -1000
Bad debt expense: 1000
(this is a cost) Provision at 31/12/2020 5000

TOT income statement effect 500 TOT income statement effect 500
(profits increase) (profits increase)
no profit effect
increases profits
reduces profits
increases profits