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Purchases and sales Inventory 1 April 2018 Capital 1 April 2018 Bank overdraft Cash Discounts Returns inwards Returns outwards

Purchases and sales Inventory 1 April 2018 Capital 1 April 2018 Bank overdraft Cash Discounts Returns inwards Returns outwards

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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**Understanding Trial Balance: An Example** At the end of the financial year on 31 March 2019, J. Wright, a sole trader, extracted the following trial balance: | **Account** | **Dr (£)** | **Cr (£)** | |------------------------------|------------|------------| | Purchases and sales | 61,420 | 127,245 | | Inventory 1 April 2018 | 7,940 | | | Capital 1 April 2018 | | 23,930 | | Bank overdraft | 140 | | | Cash | 2,480 | 62 | | Discounts | 3,486 | | | Returns inwards | | 1,356 | | Returns outwards | | | This trial balance is a useful tool as it lists all the balances from the ledgers at a specific point in time, helping identify the financial position and ensuring the debits and credits are balanced. - **Purchases and Sales**: Indicates the cost of goods purchased and total sales revenue. - **Inventory**: Represents the stock available at the start of the accounting period. - **Capital**: Signifies the initial investment or equity in the business. - **Bank Overdraft and Cash**: Shows the short-term liabilities and cash on hand. - **Discounts**: Illustrates the value of any reductions given or received. - **Returns Inwards/Outwards**: Refers to goods returned by customers or returned to suppliers, impacting revenue and expenses respectively. This layout helps ensure accurate financial reporting and aids in the preparation of financial statements.
Transcribed Image Text:**Understanding Trial Balance: An Example** At the end of the financial year on 31 March 2019, J. Wright, a sole trader, extracted the following trial balance: | **Account** | **Dr (£)** | **Cr (£)** | |------------------------------|------------|------------| | Purchases and sales | 61,420 | 127,245 | | Inventory 1 April 2018 | 7,940 | | | Capital 1 April 2018 | | 23,930 | | Bank overdraft | 140 | | | Cash | 2,480 | 62 | | Discounts | 3,486 | | | Returns inwards | | 1,356 | | Returns outwards | | | This trial balance is a useful tool as it lists all the balances from the ledgers at a specific point in time, helping identify the financial position and ensuring the debits and credits are balanced. - **Purchases and Sales**: Indicates the cost of goods purchased and total sales revenue. - **Inventory**: Represents the stock available at the start of the accounting period. - **Capital**: Signifies the initial investment or equity in the business. - **Bank Overdraft and Cash**: Shows the short-term liabilities and cash on hand. - **Discounts**: Illustrates the value of any reductions given or received. - **Returns Inwards/Outwards**: Refers to goods returned by customers or returned to suppliers, impacting revenue and expenses respectively. This layout helps ensure accurate financial reporting and aids in the preparation of financial statements.
**Financial Statement Information:** --- **Debits and Credits** - **Carriage outwards:** - £3,210 - **Rent and insurance:** - £8,870 - £630 (credited) - **Fixtures and fittings:** - Cost: £1,900 - Accumulated depreciation at 1st April 2018: £700 (credited) - **Van:** - Cost: £5,600 - Accumulated depreciation at 1st April 2018: £570 (credited) - **Accounts:** - Receivable: £12,418 - Payable: £11,400 (credited) - **Drawings:** - £21,400 - **Wages and salaries:** - £39,200 - Accrued: £319 - **General office expenses:** - £168,383 (debited) - £168,383 (credited) --- **Notes:** (a) Inventory at 31 March 2019: £6,805. (b) Wages and salaries accrued at 31 March 2019: £3,500; Office expenses owing: £16. (c) Rent prepaid at 31 March 2019: £600. (d) Increase the allowance for doubtful debts by £110 to £740. (e) Provide for depreciation as follows: - Fixtures and fittings: £190 - Van: £1,400 --- **Required:** Prepare the income statement for the year ending 31 March 2019 together with a balance sheet as at that date. --- This content is meant for educational purposes, providing insight into the structure of financial statements and adjustments commonly made for depreciation, accrued expenses, and doubtful debts. The detailed breakdown will help students and professionals understand the critical elements involved in financial reporting.
Transcribed Image Text:**Financial Statement Information:** --- **Debits and Credits** - **Carriage outwards:** - £3,210 - **Rent and insurance:** - £8,870 - £630 (credited) - **Fixtures and fittings:** - Cost: £1,900 - Accumulated depreciation at 1st April 2018: £700 (credited) - **Van:** - Cost: £5,600 - Accumulated depreciation at 1st April 2018: £570 (credited) - **Accounts:** - Receivable: £12,418 - Payable: £11,400 (credited) - **Drawings:** - £21,400 - **Wages and salaries:** - £39,200 - Accrued: £319 - **General office expenses:** - £168,383 (debited) - £168,383 (credited) --- **Notes:** (a) Inventory at 31 March 2019: £6,805. (b) Wages and salaries accrued at 31 March 2019: £3,500; Office expenses owing: £16. (c) Rent prepaid at 31 March 2019: £600. (d) Increase the allowance for doubtful debts by £110 to £740. (e) Provide for depreciation as follows: - Fixtures and fittings: £190 - Van: £1,400 --- **Required:** Prepare the income statement for the year ending 31 March 2019 together with a balance sheet as at that date. --- This content is meant for educational purposes, providing insight into the structure of financial statements and adjustments commonly made for depreciation, accrued expenses, and doubtful debts. The detailed breakdown will help students and professionals understand the critical elements involved in financial reporting.
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