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ELEMENTARY BALANCE SHEET

ELEMENTARY BALANCE SHEET
Is a statement which shows that list of assets, liabilities and capital of business at as specific period.
The purpose of preparing the balance sheet is to show the financial position of business at the end of trading period.
CAPITAL: Is the amount of money invested in the business for further production or is the money used to start business.
NET PROFIT: is the excess of gross profit over total expenses.
NET LOSS: Is the excess of total expenses over gross profit.
DRAWINGS: Is the money or goods taken out of the business for private expenses.
For example, if a proprietor taken money out for private use.
LIABILITIES: these are the debts of the business.
LONG TERM LIABILITIES: these are debts which payment take more than one year. For example, A loan from bank
CURRENT LIABILITIES: These are debts paid for near which are paid for short period, example creditor.
ASSETS: Are the property of the business, is anything has got value in business and assist the business to go smoothly.
FIXED ASSETS: The properties of the business which stay for a long period of time for example, Building, motor van premises,
It is purchased for business and not for sales and per month increase profit.
ACCOUNTING EQUATION
Is an equation comprises two sides as in mathematics such as. Y+3=4
Accounting equation deals with accounting balance through balance sheet items such as Assets, Liabilities Capital.
Accounting Equation formulated in taking consideration in balance sheet items but liabilities side comprises long term liabilities and short term liabilities.
Therefore accounting equation should be;-
CAPITAL + LIABILITIES (LONG TERM LIABILITIES) = ASSETS
CAPITAL = ASSETS – LIABILITIES
LIABILITIES = ASSETS – CAPITAL.


BALANCE SHEET AS AT 31.12.2000
LIABILITIES
AMOUNT
ASSETS
AMOUNT
Capital
Xxx
FIXED ASSETS
Add: net profit
Xxx
Buildings
Xxx
Xxx
Motor van
Xxx
Less: drawings
Xxx
Furniture
Xxx
Xxx
LONG TERM LIABILITIES
CURRENT ASSETS
Loan from bank
Xxx
Stock
Xxx
Debtor
Xxx
Cash in hand
Xxx
CURRENT LIABILITIES
Cash in bank
Xxx
Creditor
Xxx
Bank over draft
Xxx
Xxx
Xxx
EXAMPLE.1
From the following information prepare balance sheet
Building 7,000
Debtor 9,500
Creditor 21,000
Machinery 33,000
Cash in hand 18,000
Bank loan 20,000
Capital 56,000
Drawings 2,000
Net profit 10,000
Stock at 31.12.2001 37,500
Solution.QN1
BALANCE SHEET AS AT 31st Dec 2001
LIABILITIES
AMOUNT
ASSETS
AMOUNT
Capital 56,000
FIXED ASSETS
Add: net profit 10,000
66,000
Building 7,000
Machinery 33,000
40,000
Less drawings
2,000
64,000
LONG TERM LIABILITIES
CURRENT ASSETS
Bank loan
20,000
Stock 37,500
Debtor 9,500
CURRENT LIABILITIES
Cash in hand 15,000
65,000
Creditor
21,000
105,000
105,000

EXAMPLE.2
From the information prepare Trading, profit and loss account and balance sheet as at 30th December 2006.
DETAILS
DR
CR
Sales
Purchases
Carriage outsides
Carriage inwards
Stock at 1.1 2006
Return outward
Return inward
Salaries of Wage
Motor
Rent
Sundry
Motor Vehicle
Fixture and Filing
Debtors
Creditor
Cash at bank
Cash in Band
Drawings
capital
11556
326
234
3776
440
2447
664
576
1200
2400
600
4577
3876
120
2050
18600
355
3043
12844
Stock at 31 December 2006 is 4,998
Solution.QN2
DR TRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR END OF 2006 CR
Details
Amount
Details
Amount
Opening Stock
3,776
Sale
18,600
Add Purchases
11,556
Less Return inward
440
Add carriage inward
234
15,566
18,160
Less: Return outwards
355
15,211
Less: Closing stock
4,998
cost of goods sold
10,213
Gross profit c/d
7,947
18,160
18,160
Carriage outwards
326
Gross profit b/d
7,947
Salaries of wage
2,447
Motor expenses
664
Rent
576
Sundry expense
1,200
Net profit
2,734
7,947
7,947
BALANCE SHEET AS AT 31st Dec 2006
LIABILITIES
Amount
ASSETS
Amount
Capital
12,844
FIXED ASSETS
Add: net profit
2,734
Motor vehicle
2,400
15,578
Fixture and fittings
600
Less drawings
2,050
13,528
CURRENT ASSETS
LONG TERM LIABILITIES
Stock
4,998
Debtor
4,577
CURRENT LIABILITIES
Cash
120
Creditor
3,043
Cash at bank
3,876
16,571
16,571
EXERCISE. 1
JUSTINA NYAMAI TRIAL BALANCE AS AT 31 DEC 2000
S/N
Name of A/c
DR
CR
1.
2.
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Stock 1 Jan 2000.
Office equipment
Purchases
Sales
Furniture
Return in &out
Discount allowed
Insurance
Carriage in ward
Carriage out ward
Salaries
Rent
Office expenses
Debtors
Commission received
Creditors
Bank over draft
Cash in hand
Drawing
capital
32,500
25,000
487,200
19,200
18,400
7,500
3,800
100,200
2,900
134,100
29,600
17,300
74,600

900
52,500
722,100
12,400

25,000
32,200
13,500
200,000
Required;
Prepare Trading, Profit and loss A/C and the Balance sheet as at 31 Dec 2000.


DR TRADING,PROFIT AND LOSS A/C FOR THE YEAR 2000 CR
Details/Particular
Amount
Details/Particular
Amount
Opening Stock
32,500
Sales
722,100
Add: Purchases
487,200
Less: Return in ward
18,400
Add: carriage in wards
100,200
619,900
703,700
Less: Returned out ward
12,900
cost of goods available for sale
607,000
Less: Closing stock
44,300
cost of goods sold
562,700
Gross profit c/d
141,000
703,700
730,700
Carriage out ward
2,900
Gross profit
b/d
141,000
Insurance
3,800
commission received
25,000
Salaries
134,100
Net loss
29,200
Rent
29,600
Discounts
7,500
Office expenses
17,300
195,200
195,200
BALANCE SHEET AS AT 31 DEC. 2000
LIABILITIES
ASSETS
Capital
200,000
FIXED ASSETS
Less: net loss
29,200
Furniture
19,200
170,800
Office equipment
25,000
Less drawings
52,500
118,300
CURRENT ASSETS
LONG TERM LIABILITIES
Stock
44,300
Debtor
74,600
Cash
900
CURRENT LIABILITIES
Creditors
32,200
Bank over draft
13,500
164,000
164000
EXERCISE 2
Mbona draw up the following trial balance as at 30th Sept 1998,
Draft a trading, profit and loss account for the year ended 30th Sept 1998 and balance sheet as at that date.

Solution.QN2 TRIAL BALANCE AS AT 30th Sept 1998
DETAILS
DR
CR
Loan from Ndento
5,000
Capital
25,955
Drawings
8,420
Cash at bank
3,115
Cash in hand
295
Debtors
12,300
Creditors
9,370
Stock at 30/12/1997
23,910
Motor van
4,100
Office equipment
6,250
Sales
Purchases
92,100
130,900
Returns in wards
550
Return out wards
307
Carriage out ward
309
Motor van
1,630
Carriage in ward
215
Rent
2,970
Telephone charges
405
Wages & Salaries
12,810
Insurance
492
Office expenses
1,377
Sundry expenses
284
171,532
171,532
Stock at Sept 1998 was Tshs. 27,475


DR TRADING, PROFIT AND LOSS ACCOUNT FOR THE CR


YEAR ENDED 2006 Details/Particular
Amount
Details/Particular
Amount
Opening Stock
23,910
Sales
130,900
Add: Purchases
92,100
Less:Return in ward
550
Add: carriage in wards
215
116,225
130,350
Less: Returned out ward
307
cost of goods available for sale
115,918
Less: Closing stock
27,475
cost of goods sold
88,443
Gross profit c/d
41,907
130,350
130,350
Carriage out ward
309
Gross profit
b/d
41,907
Motor expenses
1,630
Rent
2,970
Telephone charges
405
Wages & salaries
12,810
Insurance
492
office expenses
1,377
sundry expenses
284
Net profit
21,630
41,907
41,907
BALANCE SHEET AS AT 30TH SEPT 1998
LIABILITIES
Amount
ASSETS
Amount
Capital
25,950
FIXED ASSETS
Add: net profit
21,630
Furniture
4,100
47,585
Office equipment
6,250
Less drawings
8,420
39,165
CURRENT ASSETS
LONG TERM LIABILITIES
Stock
27,475
Loan from O.ndeto
5,000
Debtor
12,300
CURRENT LIABILITIES
Cash in hand
245
Creditor
9,370
Cash at bank
3,115
53,535
53,535
EXERCISE.5
Salma and Omary CO.ltd started business with capital cash Tshs. 60,000 on 1st June.
June 2: Bought furniture and fitting Tshs. 10,000
3: Sold goods for cash 25,000
4: Sold goods for cash 33,000
5: Paid advertising 1,800
6: Bought goods for cash 30,000
7: Transport charges 500
12: Cash sales 25,000
15: Paid rent 550
16: Cash sales 15,000
17: Sold goods to Mwajuma 8,000
19: Bought goods from Mohamed 11,000
25: Paid wages 600
30: Stock at close 1,200.
Required;-
– Balance cash account
– Purchases, sales accounts
– Prepare Trial balance.

Solution.QN5
DR CASH BOOK ACCOUNT 1 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1st June
Capital
2
60,000
2nd June
Furniture and fitting
3
10,000
4th June
Sales
5
33,000
3rd June
Purchases
4
25,000
12th June
Sales
5
25,000
5th June
Advertising
6
1,800
16th June
Sales
5
15,000
6th June
Purchases
4
30,000
17th June
Sales
5
8,000
7th June
Transport
7
500
15th June
Rent
8
550
19th June
Purchases
4
11,000
25th June
Wages
9
600
31st June
Balance c/d
61,550
141,000
141,000
1st July
Balance b/d
61,550

DR CAPITAL ACCOUNT 2 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
31st June
Balance c/d
60,000
1st June
Cash
60,000
1st July
Balance b/d
60,000
DR FURNITURE AND FITTING ACCOUNT 3 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
2nd June
Cash
10,000
31st June
Balance c/d
10,000
1st July
Balance b/d
10,000

DR PURCHASES ACCOUNT 4 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
3rd June
Cash
25,000
31st June
Balance C/d
66,000
6th June
Cash
30,000
19th June
Cash
11,000
66,000
66,000
1st July
Balance b/d
66,000

DR SALES ACCOUNT 5 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
31st June
Balance c/d
81,000
4th June
Cash
33,000
12th June
Cash
25,000
16th June
Cash
15,000
17th June
Cash
8,000
81,000
81,000
1st July
Balance b/d
81,000


DR ADVERTISING ACCOUNTS 6 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
5th June
Cash
1,800
31st June
Balance c/d
1,800
1st July
Balance b/d
1,800

DR TRANSPORT ACCOUNT 7 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
7th June
Cash
500
31st June
Balance c/d
500
1st July
Balance b/d
500
DR RENT ACCOUNT 8 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
15th June
Cash
550
31st June
Balance c/d
550
1st July
Balance b/d
550
DR WAGES ACCOUNT 9 CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
25th June
Cash
600
31st June
Balance c/d
600
1st July
Balance b/d
600
TRIAL BALANCE AS AT 31TH JUNE
S/N
Name of Account
DR
CR
Cash
61,550
Capital
60,000
Furniture and fitting
10,000
Purchases
66,000
Sales
81,000
Advertising
1,800
Transport
500
Rent
550
Wages
600
141,000
141,000

EXERCISES
EXERCISE 1.1
Record the following transaction in the Cash account for January 1990.
Jan 1. Commenced business with capital of 6000/=
2. Purchased goods for cash 3,000/=
4. Paid office cleaners 200/=
5. Solid all the goods for cash 400/=
7. Purchased goods for cash 2,000/=
8. Paid rent 400/=
10. Sold goods for cash 3,000/=
13. Paid wages 100/=
EXERCISE 1.2
Musa commenced business on 1st June 1995 with 10,000 as capital
June 2. Bought goods for 5,000
4. paid office cleaner 500
5. Bought parking material 100
6. Sold goods 1,000
7. Purchased goods and paid cash 1,800
9. Paid wages 300
10. Cash sales 2000
12. Cash purchases 1,500.00
15. Cash sales to date 2,500.00
20. Paid rent 500.00

EXERCISE 2.1
Mashio commenced business on 1st June 2012 with 1,000,000 as capital.
2012
July 1 Bought goods for cash 300,000
1 Transport charges for cash 3,0000
2 bought goods from Kimario 70,000
4 sold goods for cash 500,000
6 paid wages for cash 20,000
8 sold goods to Masanja 60,000
11 paid for electricity for cash 5,000
18 paid Kimario 70,000
24 paid for general expenses 2,000
28 received cash from Masanja 45,000

Enter the above transactions in the respectively ledger account, complete the double entry and bring down the balance at the end of the month July.
EXERCISE 3.1
PREPARE TRADING Account for the year ended 2008.
Purchases 12,000
Sales 30,000
Stock at 1.1.2008 5,000
Stock at 31.12.2008 2,000


EXERCISE 3.2
Prepare trading Account for the year ended 2008
Purchase 70,000
Sales 120,000
Stock at 1.1.2008 30,000
Stock at 31.12.2008 25,000

EXERCISE 3.3
Prepare trading Account for the given the following.
Purchases 170,000
Sales 180,000
Stock at 1.7.2006 60,000
Stock at 30.6.2007 40,000

SOLUTIONS TO EXERCISES
SOLUTION 1.1

DR CASH A/C ( L1 ) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1/1/1990
Capital
L2
6,000
2/1/1990
Purchases
L3
3,000
5/1/1990
Sales
L5
400
4/1/1990
Office clement
L4
200
10/1/1990
Sales
L5
3,000
7/1/1990
Purchases
L3
2000
8/1/1990
rent
L6
400
13/1/1990
wages
L7
100
Solution 1.2

DR CASH A/C (L 1) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1/6/1995
Capital
2
10,000
2/6/1995
Purchases
3
5,000
6/6/1995
Sales
6
1000
4/6/1995
Office cleaner
4
500
10/6/1995
Sales
6
2000
5/6/1995
P.material
5
100
15/6/1995
Sales
6
2500
7/6/1995
Purchases
3
1800
9/6/1995
wages
7
300
12/6/1995
purchases
3
1500
20/6/1995
Rent
8
500
30/6/1995
Balance c/d
5800

Solution 2.1





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EcoleBooks | BOOK KEEPING O LEVEL(FORM ONE) NOTES - ELEMENTARY BALANCE SHEET

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5 Comments

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