Recording Business Transactions
Assessment 2 (Weighting 60%)
1000 words
Learning outcomes assessed:
- LO1. Knowledge and understanding of double entry bookkeeping
- LO2. Knowledge and understanding of books of prime entry
- LO3. Knowledge and understanding of the accounting equation and financial statements
- LO4. Demonstrate ability to record and summarise accounting information
- LO5. Demonstrate ability to maintain accurate books of accounts for a business
- LO6. Demonstrate ability to make business decisions using financial information
Part A.
Errol Anderson is going to set up a business repairing and servicing cars. However, he’s uncertain whether to choose a sole trader business or a partnership, also, he does not know about the steps for starting a business. He wants you to consult him on the following matters.
Explain the advantages and disadvantages of each type in detail and (15 Marks)
Provide 5 steps for starting a new business. (15 Marks)
(Total 30 marks)
Part B.
- Kavan is a trader dealing in electronic goods who commenced his business in 2018. For the following transactions that took place in the month of March 2021, pass journal entries.
| 01/03 – Purchased goods from Y and Co. on credit | £60,000 |
| 02/03 – Sold goods to D and Co. on credit | £30,000 |
| 03/03 – Paid Y and Co. through a bank in full settlement | £58,000 |
| 04/03 – D and Co. accepted a bill drawn by Kavan | £30,000 |
| 05/03 – Sold goods to L on credit | £20,000 |
| 06/03 – Sold goods to M on credit | £40,000 |
07/03 – Received a cheque from M in full settlement and deposited the same to the
| bank | £39,000 | |
| 08/03 – Goods returned to Y and Co. | £2,000 | |
09/03 – L became insolvent and only 90p per pound is received by cash in the final settlement
| 10/03 – Goods returned by M | £1,000 |
(30 marks)
Required:
You are required to show the Journal entries (only) (with narrative) necessary to record the following items which occur in March 2021.
- The following are the balances on the accounts of ABC on 31 August 2021:
| £ | ||
| Sales | 41,700 | |
| Purchases | 34,680 | |
| Receivables. | 6,790 | |
| Payables | 5,650 | |
| General expenses. | 12,760 | |
| Loan | 10,000 | |
| Plant and Machinery at cost | 5,000 | |
| Motor Van at cost | 6,000 | |
| Drawings. | 2,000 | |
| Rent and rates | 6,700 | |
| Insurance | 4,000 | |
| Bank overdraft | 580 | |
| Capital | 20,000 | |
| Required: | ||
| a) Prepare ABC’s trial balance as of 31 August 2021. | (20 marks ) | |
| b) Explain the benefits and limitations of the trial balance in a business | ||
| Organisation. | (20 marks) | |
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