Enter the following transactions, completing the double entry and balance off the books for the month of May 2022. May 1 Started in business with £10,000 in the bank. May 2 Purchas... Enter the following transactions, completing the double entry and balance off the books for the month of May 2022. May 1 Started in business with £10,000 in the bank. May 2 Purchased goods £290 on credit from D James. May 3 Bought fixtures and fittings £1,150 paying by cheque. May 5 Sold goods for cash £1,400. May 6 Bought goods on credit £325 from C Monty. May 10 Paid rent by cash £200. May 12 Bought stationary £45, paying in cash. May 18 Goods returned to D James £41. May 21 Paid rent of £25 by cheque. May 23 Sold goods on credit to G Cross for £845. May 24 Bought a van paying by cheque £4,100. May 30 Paid the month's wages by cash £360. May 31 The proprietor took cash for his own personal use £80.
Understand the Problem
The question is asking for the completion of a double-entry bookkeeping exercise by entering a series of transactions for the month of May 2022. It requires the user to balance the books based on the provided transactions.
Answer
The balances for May 2022: Bank Balance = £4,040, Total Assets = £5,295, Total Liabilities = £574, Owner’s Equity = £4,721.
Answer for screen readers
The final balances for May 2022 are:
- Bank Balance: £4,040
- Total Assets: £5,295
- Total Liabilities: £574
- Owner’s Equity: £4,721
Steps to Solve
-
Record Opening Balance
Start with the initial capital in the bank account:
- Bank: £10,000
- Capital: £10,000
-
Record Purchases on Credit (May 2)
Bought goods on credit from D James:
- Goods: £290 (Increase in inventory)
- Creditor (D James): £290
-
Record Fixtures and Fittings Purchase (May 3)
Bought fixtures and fittings, paying by cheque:
- Fixtures: £1,150 (Decrease in bank)
- Bank: £8,850 (Decrease)
- Asset (Fixtures): £1,150 (Increase)
-
Record Cash Sale (May 5)
Sold goods for cash:
- Cash: £1,400 (Increase in bank)
- Sales Revenue: £1,400
-
Record Credit Purchase (May 6)
Bought goods on credit from C Monty:
- Goods: £325 (Increase in inventory)
- Creditor (C Monty): £325
-
Record Rent Payment (May 10)
Paid rent in cash:
- Rent: £200 (Decrease in bank)
- Bank: £8,650 (Decrease)
-
Record Stationery Purchase (May 12)
Bought stationery, paying in cash:
- Stationery: £45 (Decrease in bank)
- Bank: £8,605 (Decrease)
-
Record Goods Return to D James (May 18)
Goods returned to D James:
- Goods: £41 (Decrease in inventory)
- Creditor (D James): £41 (Decrease)
-
Record Rent Payment (May 21)
Paid rent by cheque:
- Rent: £25 (Decrease in bank)
- Bank: £8,580 (Decrease)
-
Record Credit Sale to G Cross (May 23)
Sold goods on credit to G Cross:
- Sales Revenue: £845 (Increase in sales)
- Debtor (G Cross): £845
- Record Van Purchase (May 24)
Bought a van, paying by cheque:
- Van: £4,100 (Increase in assets)
- Bank: £4,480 (Decrease)
- Record Wages Payment (May 30)
Paid wages in cash:
- Wages: £360 (Decrease in cash)
- Bank: £4,120 (Decrease)
- Record Proprietor's Draw (May 31)
The proprietor took cash for personal use:
- Draw: £80 (Decrease in cash)
- Bank: £4,040 (Decrease)
- Calculate and Balance Off Accounts
To balance the books, calculate the closing balances of all accounts:
- Total bank balance: £4,040
- Total creditors: £290 (D James) + £325 (C Monty) - £41 (D James return) = £574
- Total assets = Fixtures + Stationery + Van = £1,150 + £45 + £4,100 = £5,295
- Owner’s Equity = Assets - Liabilities = £5,295 - £574 = £4,721
The final balances for May 2022 are:
- Bank Balance: £4,040
- Total Assets: £5,295
- Total Liabilities: £574
- Owner’s Equity: £4,721
More Information
Double-entry bookkeeping ensures that every transaction is recorded in at least two accounts, maintaining a balance between total assets and total liabilities plus owner’s equity. This practice provides accuracy and accountability in financial reporting.
Tips
- Overlooking Transactions: Ensure each transaction is recorded; missing any can lead to imbalances.
- Misclassifying Expenses and Revenues: Be cautious with categories; clearly differentiate between assets, liabilities, revenues, and expenses.
- Arithmetic Errors: Verify calculations at each step to avoid mistakes in balances.
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