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After having returned from his summer holidays on 1 September 2020, Mr. Willis, the owner of the World Wide Trading, decided to follow the advice of his accountant to start keeping his records based on the double entry system. At that date his assets and liabilities were as follows: Equipment and fixtures Inventory Balance at Bank Cash € 100,000 € 75,000 € 87,500 € 1,875 € 15,875 1,000 € Accounts Payable - Bright Li - Shah Willis' transactions during September were as follows: 2,500

After having returned from his summer holidays on 1 September 2020, Mr. Willis, the owner of the World Wide Trading, decided to follow the advice of his accountant to start keeping his records based on the double entry system. At that date his assets and liabilities were as follows: Equipment and fixtures Inventory Balance at Bank Cash € 100,000 € 75,000 € 87,500 € 1,875 € 15,875 1,000 € Accounts Payable - Bright Li - Shah Willis' transactions during September were as follows: 2,500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. After having returned from his summer holidays on 1 September 2020, Mr. Willis, the owner of the World Wide Trading, decided to follow the advice of his accountant to start keeping his records based on the double entry system. At that date his assets and liabilities were as follows: Equipment and fixtures Inventory Balance at Bank € 100,000 € 75,000 € 87,500 € Cash Accounts Payable - Bright - Li 1,875 € 15,875 € 1,000 € 2,500 Shah Willis' transactions during September were as follows: Sept 1. Sept 2. Sept 3. Sept 4 Sept 5. Sept 6. Sept 17. Sept 20. Sept 30. Paid by bank € 20,000 for repairs to distribution vehicles Sold goods to Sangster plc, original cost € 1,000, for cash € 10,000 Bought goods for resale, on time from Eastern Corp. € 5,000 Sold goods to Retailers Inc. on time, original cost € 500, for € 3,000 Bought Fittings and fixtures from Sangster plc, for € 7,000 Paid the balanced owed to Bright at 1 March less a cash discount of 2,5% Paid Eastern Corp. the full amount due by cheque Received full amount due from Retailers Inc. by cheque Paid Sangster plc. By cheque after deducting 2% cash discount a) Open World Wide Trading ledger accounts at 1 September, record all transactions for the month, balance the ledger accounts, and prepare a trial balance as at 30 September. b) Explain how you will treat the beginning of the year (opening balances) of the assets and liabilities as shown in this question. c) Consistent with the concepts learned in this aspect, explain the purpose of creating ledger accounts d) Explain how you determined the entries in terms of debit and credit in the respective ledger accounts e) Explain the double entry principle and explain its relevance in answer (a)
Transcribed Image Text:2. After having returned from his summer holidays on 1 September 2020, Mr. Willis, the owner of the World Wide Trading, decided to follow the advice of his accountant to start keeping his records based on the double entry system. At that date his assets and liabilities were as follows: Equipment and fixtures Inventory Balance at Bank € 100,000 € 75,000 € 87,500 € Cash Accounts Payable - Bright - Li 1,875 € 15,875 € 1,000 € 2,500 Shah Willis' transactions during September were as follows: Sept 1. Sept 2. Sept 3. Sept 4 Sept 5. Sept 6. Sept 17. Sept 20. Sept 30. Paid by bank € 20,000 for repairs to distribution vehicles Sold goods to Sangster plc, original cost € 1,000, for cash € 10,000 Bought goods for resale, on time from Eastern Corp. € 5,000 Sold goods to Retailers Inc. on time, original cost € 500, for € 3,000 Bought Fittings and fixtures from Sangster plc, for € 7,000 Paid the balanced owed to Bright at 1 March less a cash discount of 2,5% Paid Eastern Corp. the full amount due by cheque Received full amount due from Retailers Inc. by cheque Paid Sangster plc. By cheque after deducting 2% cash discount a) Open World Wide Trading ledger accounts at 1 September, record all transactions for the month, balance the ledger accounts, and prepare a trial balance as at 30 September. b) Explain how you will treat the beginning of the year (opening balances) of the assets and liabilities as shown in this question. c) Consistent with the concepts learned in this aspect, explain the purpose of creating ledger accounts d) Explain how you determined the entries in terms of debit and credit in the respective ledger accounts e) Explain the double entry principle and explain its relevance in answer (a)
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