Question

Eric Toure , a sole trader , commenced business on 1st January 2005 with $ 20,000 banked into the business bank account . During the year , he made the following transactions ; Withdrew $ 1,500 cash from the bank for personal use . Further capital introduced was $ 5,000 banked into the business bank account . Purchases of goods for resale and paid by cheque : $ 8,000 . Eric sold goods to BM Ltd for $ 28,050 on credit for two months . 2,500 of wages were paid by cash . BM Ltd returned goods to Eric : $ 550 . A Motor vehicle was purchased from Motors Ltd for $ 20,000 on credit . Pais shop rent by bank transfer : $ 1,200 . 60% of the amount due Motors Ltd was paid by cash . BM Ltd paid 90 % of arrears by cash .

Additional information includes ;

Bad debt 400

Return outwards 600....

Interest on loan ..... 1000

Salaries ........... 3050

Discount received ...... 890

Provision for doubtful 450

debts Discount allowed ... 720

Stock 1/1/2005 .... 2800

Advertising .......3800

Carriage inwards .....2350

Investment income500 ..

Lighting and heating .. 4330

Bank overdraft 14900..

Carriage outwards . 300

Loan . 10000

Bank charges 240

Insurance .. 350

Investment 8000

Required:

A. Open ledger accounts to record the transactions and balance of the accounts .

B. Prepare a trial balance as at 31 December 2005. (30 mar )

Answer 1

Please find below the required answer for above given question:

In the books of Eric Toure
Journal Entries for the year ended 31 December 2005
Date	Description	Debit	Credit
1	Bank Overdraft	$20,000
	Eric Toure, Capital		$20,000
	[Being amount invested to commence business]
2	Eric Toure, Drawings	$1,500
	Bank Overdraft		$1,500
	[Being cash withdrawn for personal use]
3	Bank Overdraft	$5,000
	Eric Toure, Capital		$5,000
	[Being additional amount invested to commence business]
4	Purchases	$8,000
	Bank Overdraft		$8,000
	[Being goods purchased by paying cheque]
5	Accounts Receivable	$28,050
	Sales		$28,050
	[Being goods sold on 2 months credit to BM Ltd.]
6	Salaries	$2,500
	Bank Overdraft		$2,500
	[Being wages paid in cash withdrawn from bank]
7	Return Inwards	$550
	Accounts Receivable		$550
	[Being goods sold on credit returned by BM Ltd.]
8	Motor Vehicle	$20,000
	Accounts Payable		$20,000
	[Being a motor vehicle purchased from Motors Ltd. on credit]
9	Rent Expense	$1,200
	Bank Overdraft		$1,200
	[Being shop rent paid by bank transfer]
10	Accounts Payable	$12,000
	Bank Overdraft		$12,000
	[Being 60% of the amount due to Motors Ltd paid in cash]
11	Bank Overdraft	$24,750
	Accounts Receivable		$24,750
	[Being 90% of arrears due i.e. $27,500 ($28,050 - $550) paid in cash by BM Ltd.]

Ledger Entries for the year ended 31 December 2005
Bank Overdraft
Eric Toure, Capital	$20,000	Opening Balance	$14,900
Eric Toure, Capital	$5,000	Eric Toure, Drawings	$1,500
Accounts Receivable	$24,750	Purchases	$8,000
		Salaries	$2,500
		Rent Expense	$1,200
		Accounts Payable	$12,000
		Closing Balance c/f	$9,650
	$49,750		$49,750
Eric Toure, Capital
Closing Balance c/f	$25,000	Bank Overdraft	$20,000
		Bank Overdraft	$5,000
	$25,000		$25,000
Eric Toure, Drawings
Bank Overdraft	$1,500	Closing Balance c/f	$1,500
	$1,500		$1,500
Purchases
Bank Overdraft	$8,000	Closing Balance c/f	$8,000
	$8,000		$8,000
Accounts Receivable
Sales	$28,050	Return Inwards	$550
		Bank Overdraft	$24,750
		Closing Balance c/f	$2,750
	$28,050		$28,050
Sales
Closing Balance c/f	$28,050	Accounts Receivable	$28,050
	$28,050		$28,050
Salaries
Opening Balance	$3,050	Closing Balance c/f	$5,550
Bank Overdraft	$2,500
	$5,550		$5,550
Return Inwards
Accounts Receivable	$550	Closing Balance c/f	$550
	$550		$550
Motor Vehicle
Accounts Payable	$20,000	Closing Balance c/f	$20,000
	$20,000		$20,000
Accounts Payable
Bank Overdraft	$12,000	Motor Vehicle	$20,000
Closing Balance c/f	$8,000
	$20,000		$20,000
Rent Expense
Bank Overdraft	$1,200	Closing Balance c/f	$1,200
	$1,200		$1,200

Trial Balance as on 31 December 2005
Particulars	Debit	Credit
Bad Debt	$400
Return Outwards		$600
Interest on Loan	$1,000
Salaries
Discount Received		$890
Provision for Doubtful		$450
Debts Discount Allowed	$720
Stock 1/1/2005	$2,800
Advertising	$3,800
Carriage Inwards	$2,350
Investment Income		$500
Lighting and Heating	$4,330
Bank Overdraft / Bank	$9,650
Carriage Outwards	$300
Loan		$10,000
Bank Charges	$240
Insurance	$350
Investment	$8,000
Eric Toure, Capital		$25,000
Eric Toure, Drawings	$1,500
Purchases	$8,000
Accounts Receivable	$2,750
Sales		$28,050
Salaries	$5,550
Return Inwards	$550
Motor Vehicle	$20,000
Accounts Payable		$8,000
Rent Expense	$1,200
Total	$73,490	$73,490