ABC Dealing is a business owned and run by Alan B Crick. Whilst the following events took place in the first few days of this month, ledger accounts have not yet been written up and that will becomeyour task here.

01-JunThe business bank account is in funds by £1,500 and there is £2,000 cash in the business’s office safe. Open accounts as relevant and simply show these as existing balances brought forward.

01-JunBought new inventory on credit from N Joshi and received an invoice for £1,800 inclusive of VAT.

01-JunSold goods to Joan’s Phones on credit and sent an invoice for £3,500 plus VAT.

01-JunAlan B Crick puts £2,500 into the business bank account and puts £2,500 into the office safe. This is all new money to his business.

02-JunPurchased goods for resale in cash from MTC Wholesale and their cash invoice/receipt was £2,000 goods,plus VAT.

03-JunSold more goods for £2,700 including VAT and all customers paid by cheque.

05-JunGoods returned by Joan’s Phones and ABC issued a credit note for £250 plus VAT.

06-JunAlan purchased a second-hand van solely for use within ABC Dealing from D Trotter in cash for £1,200 including VAT.

TASK: Opening ledger accounts as necessary and following recognised bookkeeping and accounting principles, correctly record each of the transactions stated above.(

principles and characteristics of Value Added Tax

Explain the principles and characteristics of Value Added Tax from a business accounting perspective.

Accounting and Auditing

Describe the role and purpose of an internal auditor fora business.

Ledger accounts and Financial statements

Neha has drafted the ledger accounts and financial statements at year end for her promotions and marketing business and is pleased that GrossProfit is £74,500 and Net Profit is £14,500. However, on checking the details more closely, she identifies the following:

A.Rent from a client of £3,500 for the short-term use of an unwanted outbuilding for storage has been credited to the Land and Buildings account.

B.The cost of a colour photocopier for the business, £13,500 including installation costs, has been debited to the Purchases account.

C.A bill for £650 for repairing some office equipment has been debited to the Vehicle Expenses account.

D.The price of a motor vehicle for business use, namely £7,500, has been debited to the Vehicle Expenses account.

E.Carriage in of £80 has been entered to the Postage and Delivery account

F.£18,000 from the sale of the outbuilding has been credited to the Sales Revenue account.

TASK: )i)Briefly explain the accounting concern in each of the six situations A to F given above. (6 marks)

ii)Ignoring depreciation and other adjustments,and starting with Neha’s draft gross and net profit figures, briefly show the effect upon profit of correcting each issue and then give the revised Gross Profit and Net Profit figures after amendments have been made.


Explain the significance of a ‘true and fair view’ in relation to the accounts and financial statements of a company or other incorporated business.

cash Budgeting

Describe the major practical differences between a cash budget and other budgets within a business’s budgetary control system.


The following information relates to Whyzee Limited in 2017 and comes from its various budgets, management decisions, activities and expectations during the year:It has agreed to buy new machinery in July for £200,000 and a finance arrangement to pay for it in 5 equal monthly instalments, the first due on the date of purchase.Themachinery attracts a government grant worth 15% of its purchase price, on evidence that the machinery instalments are being made on time. This is expected in 3 equal monthly instalments from August.Rent payable for their premises is £24,000 per year, payable quarterly in advance. The next payment is due in July.Purchases of Raw Materials are budgeted to be £10,000 per month with a variety of payment terms, but averages out as 40% is paid in the current month and 60% in the month afterwards.Other overheads and expenses are budgeted in each month, as follows:-Wages of £5,000, payable in the month earned-Depreciation of £150 in July, and £450 in each following month, applied in the relevant month-Electricity, Water and Gas usage of £1,350 each month settled monthly-Administration costs of 5% of each months’ receipts from sales, and paid in the following month.Cash sales are treated as fully paid at the time of purchase and Whyzee Ltd.’sstandard credit term for its customers is full payment by the end of the following month. The pattern of sales is expected to be:£MayJuneJulyAugustSeptemberOctoberCash Sales12,00014,00016,00018,00020,00022,000Credit Sales25,00026,00027,00028,00029,00030,000MonthlySales37,00040,00043,00046,00049,00052,000The bank balance on 30 June is budgeted to be £25,000 (in funds). An overdraft fee of £20 is charged when any end-of-month bank balance is overdrawn, and any end-of-month positive bank balance (that is, it is not overdrawn) attracts1% interest. Bank fees and interest, where arising, are applied in the following month.TASK for part b)Using the information given above relating to Whyzee Limited, prepare their cash budget for the fourmonths from July to October 2017.

Based upon the scenario and your cash budget in 4b) above, what conclusions can be drawn and therefore what recommendations can be given to Whyzee Limited?

Ledger (Accounting)

The double-entry ledger is conveniently divided so that accounts with similar characteristics are placed together. Identify each of the recognised ledger divisions and describe,with an example,the account types that each division contains.

Book keeping

Explain how a suspense account can be used as part of the book-keeping error correction process.

The following are extracted balances from Harbhajan’s business accounts along withother information relating to the business’s year end on 30 April 2017. For some reason, the figure for Capital at the beginning of the year has not been supplied, although you have been given the year end net profit figure:£Capital as at 1 May 2016unknownMachineryat cost100,000Sales Revenue59,000Motor Vehicles at cost50,000Purchases25,000Trade Receivables13,500Trade Payables12,500Accumulated [provision for] depreciation:Machinery10,000HM Revenue and Customs: VAT (owing)7,750Net Profit as at 30 April 20177,105Accumulated [provision for] depreciation:Motor Vehicles5,000Water and Utilities4,500Inventory as at 1 May 20163,500Wages and Salaries3,500Rent3,000Bank (in funds)1,800Purchases Returns1,355Business Rates1,250Bad Debts written off1,150Sales Returns1,250Discounts Allowed950Cash in Hand760Drawings750Discounts Received550The Rent figure includes £600 relating to May, June and July 2017.The Machinery still has to be depreciated at year end by 10% straight line.There was unpaid Wages and Salaries at year end 30 April 2017 of £800.Stocktake at year end 30 April 2017 valued Inventory at £5,000.Motor Vehicles need year end depreciation (diminishing [reducing] balance at 10%).

Use the information given about Harbhajan’s business as appropriate to prepare aStatement of Financial Position for its year end, including the missing figure for Capital.