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Chapter 1 l The accounting equation and the balance sheet

This means that appropriate reinforcement of what you have learnt can take place, even if you
are studying on your own and have to miss out all the ‘A’ questions because you have no access to
the answers.
Multiple choice questions. In addition to these review questions, there are questions relating to the
material in this chapter among a bank of multiple choice questions at the end of Chapter 6. You
should wait and attempt them when you reach them, not before.

1.1 Complete the gaps in the following table:

Assets Liabilities Capital

£ £ £
(a) 12,500 1,800 ?
(b) 28,000 4,900 ?
(c) 16,800 ? 12,500
(d) 19,600 ? 16,450
(e) ? 6,300 19,200
(f ) ? 11,650 39,750

1.2A Complete the gaps in the following table:

Assets Liabilities Capital

£ £ £
(a) 55,000 16,900 ?
(b) ? 17,200 34,400
(c) 36,100 ? 28,500
(d) 119,500 15,400 ?
(e) 88,000 ? 62,000
(f ) ? 49,000 110,000

1.3 Which of the items in the following list are liabilities and which of them are assets?

(a) Loan to C Shirley (d) Computers

(b) Bank overdraft (e) We owe a supplier for goods
(c) Fixtures and fittings (f ) Warehouse we own

1.4A Classify the following items into liabilities and assets:

(a) Motor vehicles (f ) Owing to bank

(b) Premises (g) Cash in hand
(c) Creditors for goods (h) Loan from D Jones
(d) Stock of goods (i ) Machinery
(e) Debtors

1.5 State which of the following are wrongly classified:

Assets Liabilities

Loan from C Smith Stock of goods

Cash in hand Debtors
Machinery Money owing to bank
Creditors
Premises
Motor vehicles ‘

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Part 1 l Introduction to double entry bookkeeping

‘ 1.6A Which of the following are shown under the wrong headings?
Assets Liabilities
Cash at bank Loan from J Graham
Fixtures Machinery
Creditors Motor vehicles
Building
Stock of goods
Debtors
Capital

1.7 B Wise is setting up a new business. Before actually selling anything, he bought a van for
£4,500, a market stall for £2,000 and a stock of goods for £1,500. He did not pay in full for his stock
of goods and still owes £1,000 in respect of them. He borrowed £5,000 from C Fox. After the events
just described, and before trading starts, he has £400 cash in hand and £1,100 cash at bank.
Calculate the amount of his capital.

1.8A F Flint is starting a business. Before actually starting to sell anything, he bought fixtures for
£1,200, a van for £6,000 and a stock of goods for £2,800. Although he has paid in full for the
fixtures and the van, he still owes £1,600 for some of the goods. B Rub lent him £2,500. After the
above, Flint has £200 in the business bank account and £175 cash in hand. You are required to cal-
culate his capital.

1.9 Draw up G Putty’s balance sheet from the following information as at 31 December 20X8:
£
Capital 7,200
Debtors 1,200
Van 3,800
Creditors 1,600
Fixtures 1,800
Stock of goods 4,200
Cash at bank 300

1.10A Draw up A Brick’s balance sheet as at 30 June 20X6 from the following items:
£
Capital 10,200
Equipment 3,400
Creditors 4,100
Stock of goods 3,600
Debtors 4,500
Cash at bank 2,800

1.11 Complete the columns to show the effects of the following transactions:
Effect upon
Assets Liabilities Capital
(a) We pay a creditor £70 in cash.
(b) Bought fixtures £200 paying by cheque.
(c) Bought goods on credit £275.
(d) The proprietor introduces another £500 cash into the firm.
(e) J Walker lends the firm £200 in cash.
(f ) A debtor pays us £50 by cheque.
(g) We return goods costing £60 to a supplier whose bill we had
not paid.
(h) Bought additional shop premises paying £5,000 by cheque.

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Chapter 1 l The accounting equation and the balance sheet

1.12A Complete the columns to show the effects of the following transactions;

Effect upon
Assets Liabilities Capital
(a) Bought a van on credit £8,700.
(b) Repaid by cash a loan owed to F Duff £10,000.
(c) Bought goods for £1,400 paying by cheque.
(d) The owner puts a further £4,000 cash into the business.
(e) A debtor returns to us £150 goods. We agree to make an
allowance for them.
(f) Bought goods on credit £760.
(g) The owner takes out £200 cash for his personal use
(h) We pay a creditor £1,150 by cheque.

1.13 G Brown has the following items in her balance sheet as on 30 April 20X8: Capital £18,400;
Creditors £2,100; Fixtures £2,800; Car £3,900; Stock of goods £4,550; Debtors £2,780; Cash at bank
£6,250; Cash in hand £220.
During the first week of May 20X8
(a) She bought extra stock for goods £400 on credit.
(b) One of the debtors paid her £920 by cheque.
(c) She bought a computer by cheque £850.
You are asked to draw up a balance sheet as on 7 May 20X8 after the above transactions have
been completed.

1.14A J. Hill has the following assets and liabilities as on 30 November 20X9: Creditors £2,800;
Equipment £6,200; Car £7,300; Stock of goods £8,100; Debtors £4,050; Cash at bank £9,100; Cash in
hand £195.
You are not given the capital amount at that date.
During the first week of December 20X9
(a) Hill bought extra equipment on credit for £110.
(b) Hill bought extra stock by cheque £380.
(c) Hill paid creditors by cheque £1,150.
(d) Debtors paid Hill £640 by cheque and £90 by cash.
(e) Hill put in an extra £1,500 into the business, £1,300 by cheque and £200 in cash.
You are to draw up a balance sheet as on 7 December 20X9 after the above transactions have been
completed.

You can find a range of additional self-test questions, as well as material to help you with
your studies, on the website that accompanies this book at www.pearsoned.co.uk/wood

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