ACCA FA · Guided practice (Show me how)
Chapter 3: Double Entry Bookkeeping
Double entry - balancing the accounts and the trial balance
The following are the transactions of Omar's business during his first month of trading.
- Omar starts a business and pays in $12,000 as capital
- The business borrows $5,000 from the bank as a long-term loan
- The business buys shop fittings for $4,000 cash
- They buy goods for resale for $1,500 cash
- They buy more goods for resale for $2,500 on credit from Ridge Supplies
- They pay wages of $800 cash
- They pay electricity of $400 cash
- They sell three quarters of the goods for $4,200 cash
- They sell the remaining goods on credit for $1,600 to Kemp and Co
- They pay $1,800 cash on account of the amount owing to Ridge Supplies
- They receive $1,000 from Kemp and Co
- Omar withdraws $500 cash from the business
All of the goods bought were sold during the month, so there is no inventory left at the end of it.
(a) Balance off the accounts
State the balance carried forward on Omar's cash, purchases, payables, sales and receivables accounts at the end of his first month of trading.
(b) Trial balance, profit and capital
Prepare Omar's trial balance at the end of the month, and state his profit for the month and the balance on his capital account after the profit and his drawings have been transferred to it.
Opening this exercise…