Question

The following information is available for the business of Greg Samuels, a bookseller maker.

January

1. Started business with £10,000 in business bank account
2. Made purchase for £200 cash
3. Further purchases from Cabbage for £400 on credit
4. Paid rent £1000 cash
5. Bought stationery for £60 cash
6. Bought an old van for £4000 from Peters promising to pay later
7. Sold rare books to Greene for £1000 cash
8. Paid Cabbage £140
9. Sold book on credit to Doy for £140
10. Bought more stationery for £40 cash
11. Paid cash of £150 for motor expenses
12. Paid Peters £1000
13. Took £300 from the business to pay for living expenses
14. Received £100 for Doy

Requirements

1. Show how these transactions would be recorded in the ledger accounts
2. Balance the ledger accounts and extract a trial balance
3. Extract a SOPL and SOFP for Greg Samuels (a sole trader).

Answer 1

                                                                                Ledger

Bank A/c
Particulars	Amount	Particulars	Amount
To capital	10,000	By balance/c/d	10,000

Capital A/c
Particulars	Amount	Particulars	Amount
To Balance/c/d	10,000	By bank a/c	10,000

Purchase A/c
Particulars	Amount	Particulars	Amount
To Cash	200	By balance/c/d	600
To Cabbage(Creditors)	400

Cash A/c
Particulars	Amount	Particulars	Amount
To sales	1000	By Purchase	200
To Doy (debtors)	100	By Rent	1000
To Balance/c/d	1790	By stationery	60
		By Cabbage( Creditor)	140
		By Stationery	40
		By Motor Expense	150
		By Peters(creditor)	1000
		By Drawings	300

Cabbage ( Creditors)
Particulars	Amount	Particulars	Amount
To cash	140	By Purchase	400
To Balance/c/d	260

Rent A/c
Particulars	Amount	Particulars	Amount
To cash	1000	By balance/c/d	1000

Stationery A/c
Particulars	Amount	Particulars	Amount
To cash	60	By balance/c/d	100
To cash	40

Van A/c
Particulars	Amount	Particulars	Amount
To Peters	4000	By balance/c/d	4000

Sales A/c
Particulars	Amount	Particulars	Amount
To Balance/c/d	1140	By cash	1000
		By Doy	140

Doy (Debtors) A/c
Particulars	Amount	Particulars	Amount
To sales	140	By cash	100
		By balance/c/d	40

Motor expense
Particulars	Amount	Particulars	Amount
To cash	150	By balance/c/d	150

Peters ( Creditors)
Particulars	Amount	Particulars	Amount
To Van	4000	By cash	1000
		By balance/c/d	3000

Drawings A/c
Particulars	Amount	Particulars	Amount
To Cash	300	By balance/c/d	300

                                                                TRIAL BALANCE

Particulars	Debit	Credit
Bank	10,000
Capital		10,000
Purchase	600
Cash		1790
Cabbage (creditors)		260
Rent	1000
Stationery	100
Van	4000
Sales		1140
Doy ( Debtors)	40
Motor Expense	150
Peters ( Creditors)		300
Drawings	300
Total	16190	16190

STATEMENT OF PROFIT OR LOSS

Particulars	Amount	Amount
Sales Revenue	1140
Less Purchase	600
Gross Profit		540
Less Expense
i. Rent	(1000)
ii. Stationery	(100)
iii. Motor Expense	(150)
		(1250)
Loss of the firm		(710)

STATEMENT OF FINANCIAL POSITION

Particulars	Amount	Amount
Non-Current Asset
Van		4000
Current Asset
Bank	10,000
Cash	(1790)
Debtors (Doy)	40
	8250
Less Current Liabilities
Peters (Creditors)	3000
Cabbage (Creditors’)	260
	3260
Net Current Asset		4990
Net Asset		8990
Financed By
Capital	10,000
Less Loss of the firm	(710)
Less Drawings	(300)
Closing Capital		8990

Few Clarification on the solution :

1. I have used the word Creditors for credit purchase of goods and Van . Creditors can also be written as Accounts Payable

2. Similar I have used Debtors for credit sale . Debtors can also be written as Accounts Receiveable.

3. All transaction are through cash and cash is not having sufficient balance . Thats is why Cash is going negative which is impossible in normal life. Cash can be zero at maximum but can't be negative in practical . But I have solved what is given in the question. Either transaction should have been through bank account or some cash withdrawn from firm bank account for daily purpose. But there is no such clarity in question.

For any clarification / doubt you can ask in comments

Thanks