Question

Abbas Ltd

Basic Bookkeeping

Mr Abbas has decided to set up in business selling football shirts in the market place. Following transactions took place from the start of the business:

1) He begins the business by putting £ 30,000 into a bank Account

2) Mr. Abbas borrowed £ 4,000 from his brother to purchase a motor van for the business.

3) Mr. Abbas buys a market stall and pays £ 5,000 in cash.

4) He buys some football shirts for £ 18,000. He buys these on credit and does not have to pay for them immediately.

5) Mr. Abbas pays £ 10,000 to his suppliers for some of the shirts he purchased

6) Mr. Abbas sold 50% of the shirts for £ 12,000 in cash

7) He sold shirts for £ 9,000 to a shop owner in another town, these shirts originally cost £ 5,000. He sold these shirts on credit, giving the purchaser one month to pay.

8) Mr. Abbas repays £ 1,000 of the loan

9) Mr. Abbas paid his trade suppliers £ 6,000

10) Mr. Abbas receives £ 8,000 of the money owed to him by the customer (trade receivable)

11) Mr. Abbas purchased another £ 2,500 of shirts on credit.

12) Mr. Abbas decided decides to take £ 4,000 in cash out of his business, and he also takes inventory with a value of £ 2,000

Required:

1) Journal Entries to record above transactions

2) Ledger / T - Accounts for the above transactions

3) Trial Balance

4) Profit & Loss Account and Balance Sheet

Answer 1

(Amounts in £)

Journal entries:-

(1)Bank A/c dr 30000

To Capital A/c 30000

[Amount invested in business]

(2)Cash A/c dr 4000

To loan (from brother) A/c 4000

[Loan taken from brother]

Motor van A/c dr 4000

To Cash A/c 4000

[Motor van purchased]

(3)market stall A/c dr 5000

To cash A/c 5000

[market stall purchased in cash]

(4) Purchase A/c dr 18000

To Creditor A/c 18000

[Football t-shirts purchased]

(5) Creditors A/c dr 10000

To Cash A/c 10000

[Cash paid for t-shirts purchased]

(6) Cash A/c dr 12000

To Sales A/c 12000

[t-shirts sold for cash]

(7) Debtor(shop owner)A/c dr 9000

To sales A/c 90000

[goods sold to shop owner on credit]

(8) Loan (from brother) A/c dr 1000

To cash A/c 1000

[repayment of loan from brother]

(9)Creditors A/c dr 6000

To cash A/c 6000

[Payment made to creditors]

(10)Cash A/c dr 8000

To Debtors A/c 8000

[cash received from debtors]

(11) Purchase A/c dr 2500

To Creditors A/c 2500

[purchased on credit]

(12) Capital A/c dr 6000

To Cash A/c 4000

To Purchase A/c 2000

[amount & goods withdrawn from business]

or

Capital A/c dr 4000

Drawing A/c dr 2000 (this is subsequently transferred to capital A/c)

To Cash A/c 4000

To Purchase A/c 2000

[amount & goods withdrawn from business]