ACCA FA · Guided practice (Show me how)
Chapter 3: Double Entry Bookkeeping
Omar - balancing the cash account
Omar opens a shop. These are all the transactions of the business during his first month of trading.
Omar starts the business and pays in $12,000 as capital. The business borrows $5,000 from the bank as a long-term loan. It buys shop fittings for $4,000, paying at once, and goods for resale for $1,500, also paying at once. It buys further goods for resale for $2,500 from Ridge Supplies on credit.
It pays wages of $800 and an electricity bill of $400. It sells three quarters of the goods for $4,200, the customers paying at once, and the remainder to Kemp & Co on credit for $1,600.
It pays $1,800 to Ridge Supplies on account of what is owed, and receives $1,000 from Kemp & Co. Omar withdraws $500 from the business for himself.
This exercise asks you for the cash account only. Every transaction of the month is listed above, and part of the work is deciding which of them the cash account never sees.
(a) Which transactions reach the cash account, and on which side
Identify, for each of the twelve transactions of Omar's first month of trading, whether it is entered on the debit side of the cash account, on the credit side, or not in the cash account at all.
(b) and (c) Total each side
Calculate the totals of the entries on the debit side and on the credit side of Omar's cash account for the first month, excluding the balance carried forward.
(d) Close the account off and open the next month
Show the balance carried forward on Omar's cash account at the end of the first month and the balance brought forward at the start of the second month, with the side and amount of each, and state whether the balance brought forward is an asset or a liability.
Opening this exercise…