Part A Anne York is a sole trader who started the business of buying and selling furniture in Brighton on the 1st of October 2021. She is going to prepare accounts to 31st of September 2021. She contributed to the business with £10,000 in the Bank, £4,800 cash, 45,000 flat and 12,000 Car. The transactions during the month are as follows: 2/10 Purchased furniture £5400 for sale on credit from Home Ltd 4/10 She bought a computer for £800 and a printer £200 from a local shop in London and paid by cheque. 5/10 Sold goods for £ 2800 and received the money via Bank account 12/10 Paid in Cash £110 for repairing printer 18/10 Part of furniture returned to Home Ltd £250 Page | 13 21/10 The owner received rent £800 for flat and deposited it to the bank account 23/10 Sold goods to Rayan £2100; from this amount £1800 cash received immediately and the rest remains on credit. 23/10 Sold goods of £700 to David and received cash 24/10 Bought a new Laptop for business use by issuing a cheque £1700 26/10 Paid the month’s wages to the part-time shopkeeper by cheque £820 30/10 The owner rented an office place in a Business Park near the London on 1st October and paid rent by cheque £850 31/10 The owner has also paid £ 1200 from the business bank account to book a hotel and flight in Scotland for her holiday. 31/10 £150 Cash received from Rayan. Required: a) Write double entry record the transactions in T-accounts b) Balance the accounts and bring down an opening balance c) Extract a Trial balance as at 31st October 2021
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Part A
Anne York is a sole trader who started the business of buying and selling furniture in Brighton on the
1st of October 2021.
She is going to prepare accounts to 31st of September 2021. She contributed to the business with
£10,000 in the Bank, £4,800 cash, 45,000 flat and 12,000 Car. The transactions during the month are
as follows:
2/10 Purchased furniture £5400 for sale on credit from Home Ltd
4/10 She bought a computer for £800 and a printer £200 from a local shop in London and paid by
cheque.
5/10 Sold goods for £ 2800 and received the money via Bank account
12/10 Paid in Cash £110 for repairing printer
18/10 Part of furniture returned to Home Ltd £250
Page | 13
21/10 The owner received rent £800 for flat and deposited it to the bank account
23/10 Sold goods to Rayan £2100; from this amount £1800 cash received immediately and the rest
remains on credit.
23/10 Sold goods of £700 to David and received cash
24/10 Bought a new Laptop for business use by issuing a cheque £1700
26/10 Paid the month’s wages to the part-time shopkeeper by cheque £820
30/10 The owner rented an office place in a Business Park near the London on 1st October and paid
rent by cheque £850
31/10 The owner has also paid £ 1200 from the business bank account to book a hotel and flight in
Scotland for her holiday.
31/10 £150 Cash received from Rayan.
Required:
a) Write double entry record the transactions in T-accounts
b) Balance the accounts and bring down an opening balance
c) Extract a
d) Prepare an Income Statement for the period ended 31st October 2021 13 marks
The closing inventory is £ 320
e) Prepare a
f) Write a brief letter to Linda explaining what drawings are concerning small business and
answering her query concerning her holiday.
PART B
a) According to the information available in Income and Financial position statements in Part A, calculate
the following ratios for Anne’s business for October 2021
Competitors Average
Net profit
margin
Gross
profit
margin
ratio
Acid test
ratio
collection period
Accounts
payable
payment
period
Year 2019 0.32 0.55 2.7 1.34 16 Days 27 Days
Year 2020 0.28 0.56 2.6 1.32 28 Days 12Days
Page | 14
Year 2021 0.02 0.08 2.8 1.38 26 Days 17 Days
b. Assuming Anne’s competitor’s ratio averages are as stated above for month October of years 2019,
2020 and 2021: Analyse her performance with reference to the ratios of October 2021 calculated in
comparison to those of her competitor. Also, briefly explain the impact of Covid -19 outbreak on the
average ratios (Maximum of 500 words).
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