Task 2.

Ban Gay and Ban Trai’s partnership

Statements of changes in partners’ capital
At 31 March 19x3, with adjustments on Provision for doubtful debts and Provision for
depreciation, the partnership’s capital will change:

Ban Gay Ban Trai Total Partnership

Capital balances, 1 March, 20X3 59,625 33,500 93,125
Less Withdrawals: (555) (1,305) (1,860)
Provision for doubtful debts 555 405 960
Provision for depreciation 0 900 900
Capital balances, March 31, 20X3 59,070 32,195 91,265

Partnership’s balance sheet

BAN GAY, BAN TRAI
BALANCE SHEET
 AS AT 31, MARCH 20X3
Accounts Ref £ £
Current assets
Inventories 49,500
Account receivable 31,040
Prepaid expense 9,375
Cash 12,750
102,665
Fixed asset
Furniture and fixture 38,100
Office equipment 14,250
52,350
Current liabilities
Account payable 63,750
Net current assets 38,915

Long term liabilities -

Net assets 91,265

Capital
Ban Gay's capital 59,070
Ban Trai's capital 32,195
Net assets = capital 91,265

Task 3
Profit and loss statement
GRIEG COMPANY
TRADING AND PROPHIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31, JANUARY X1
Accounts Notes £ £
Sales 11,000
 Cost of sales (7,000)
Gross profit 4,000

Expenses
-Depreciation expense (120)
Net profit 3,880

Balance sheet
GRIEG COMPANY
BALANCE SHEET
AS AT 31 JANUARY, 19X3
Accounts Notes Debit Credit
Current assets
Cash 11,300
Inventories 2,000
Account receivable 1,000
Total current assets 14,300
Fixed assets
 Equipment 1,200
Accumulated depreciation (120)
Total fixed assets 1,080
Current liabilities
Account payable 1,000
Net current assets 13,300
14,380
Long term liabilities
Loan (500)
Net assets 13,880
Capital
Beg. Capital 10,000
Net profit 3,880
End. Capital 13,880

Appendix

Task 2
At March 1, 19X3:

Provision for doubtful accounts receivable:

Provision required = 3% x Account Receivable (AR)

For Ban Gay (Numbers are calculated in Pound)

Provision required = 3% x 18,500 = 555

Journal entry:

Debit Doubtful debt expense 555

 Credit Provision for doubtful debts 555

In the balance sheet of Ban Gay, debtors will appear as follows:

Account Receivable 18,500

Less Provision for doubtful debt (555)

17,945

For Ban Trai

Provision required = 3% x 13,500 = 405

Entry:

Debit Doubtful debt expense 405

Credit Provision for doubtful debts 405

In the balance sheet of Ban Trai, debtors will appear as follows:

Account Receivable 13,500

Less Provision for doubtful debt (405)

13,095

Depreciation
Since Ban Trai’s Furniture and Fixtures are under depreciated by 900, then the entry will be as
following:

Debit Doubtful debt expense 900

Credit Provision for depreciation 900

Then the Furniture and Fixtures account will be:

Furniture & Fixtures 9,000

Less Provision for depreciation (900)

 8,100

Calculations on balance sheet

1. Calculation of furniture and fixture of partnership:

Furniture and fixture = Ban Gay's furniture + Ban Trai's furniture - under depreciation of
furniture and fixture

Partnership's future and fixture = 30,000 + 9,000 - 900 = 38,100

2. Calculation of office equipment:

Office equipment = Ban Gáy's office equipment + Ban Trai's office equipment

Office equipment of partnership = 11,500 + 2,750 = 14,250

3. Calculation of stocks (inventories):

Inventories = Inventories of Ban Gay + Inventories of Ban Trai

Inventories of partnership = 30,000 + 19,500 = 49,500

4. Calculation of accounts receivable:

Accounts receivable = Ban Gáy's accounts receivable - Ban Gay's provision for bad debts + Ban
Trai's accounts receivable - Ban Trai's provision for bad debts

Accounts receivable of partnership = 18,500 -555 + 13,500 - 405 = 31,040

5. Calculation of Prepaid expenses:

Prepaid expenses = Ban Gay's prepaid expenses + Ban Trai's prepaid expenses

Prepaid expenses of partnership = 6,375 + 3000 = 9,375

6. Calculation of cash

Cash = Cash of Ban Gay + cash of Ban Trai

Cash of partnership = 9,000 + 3,750 = 12,750

7. Calculation of account payable:

Accounts payable = Ban Gay's accounts payable + Ban Trai's accounts payable

Accounts payable of partnership = 45,750 + 18,000 = 63,750

Task 3.
Journal entries
1. The company was incorporated and common shareholders invested a total of 10,000
pound

This will lead to an increase in cash, and also a rise in contributed capital (in stakeholders’
equity)

Debit Cash 10,000

Credit Contributed capital 10,000

2. Equipment valued at 1,200 was acquired for cash

Since the company used cash to buy the equipment, then cash account will decrease and
equipment account will rise.

Debit Equipment 1,200

Credit Cash 1,200

3. Merchandise inventory was purchased on credit for 9,000

As inventory was purchased on credit, this transaction will create a liability, thus increasing
Loan, and having effect on inventory account. Though there is an increase in Account Payable,
this increase in be recorded in Credit side

Debit Inventory 9,000

Credit Loan 9,000

4. Cash was borrowed from a bank, 500

This borrowing will lead to a rise in cash of 500, and also an increase in Account Payable
(recorded in Credit side)

Debit Cash 500

 Credit Account Payable 500

5. Merchandise inventory costing 7,000 was sold for 11,000 (cash for 6,000 and on
credit for 5,000)

In this transaction, when the company sold the inventory, there was a decline in Inventory
account at 7,000 and a rise in cash for 6,000 as well as Account receivable account for 5,000.
Besides, the company also gained some profit from this transaction (4,000), and this amount will
be recorded in Gain on sale of inventory account.

The gain on sale of inventory will be treated as a Revenue account; therefore, it will be recorded
in Credit side

Debit Cash 6,000

Debit Account Receivable 5,000

Debit Cost of sale 7,000

Credit Inventory 7,000

Credit Sales 11,000

6. Collection of the above Account Receivable, 4,000

As money was collected, cash will increase and in respect Account Receivable will decrease

Debit Cash 4,000

Credit Account Payable 4,000

7. Payments of account payable 8,000

Cash is used to pay the liability, hence, cash account will decline and so will account payable

Debit Account Payable 8,000

Credit Cash 8,000

8. Depreciation expense of 120 was recognized

Depreciation expense is treated as an expense account, and there is a rise in Accumulated
depreciation, which decreases the value of the asset.

Debit Depreciation expense 120

Credit Accumulated Depreciation 120

GRIEG COMPANY
LEDGER ACCOUNT
Cash
Transaction Debit Credit Transaction
1 10,000
1,200 2
4 500
5 6,000
6 4,000
8,000 8
11,300
Common stock
Transaction Debit Credit Transaction
10,000 1
 10,000
Account receivable
Transaction Debit Credit Transaction
5 5,000
4,000 6
1,000
Inventory
Transaction Debit Credit Transaction
3 9,000
7,000 5
2,000
Equipment
Transaction Debit Credit Transaction
2 1,200
1,200
Account payable
Transaction Debit Credit Transaction
9,000 3
7 8,000
1,000

Loan
Transaction Debit Credit Transaction
500 3
500
Sales
Transaction Debit Credit Transaction
11,000 5
11,000
Cost of sales
Transaction Debit Credit Transaction
 7 7,000
7,000
Depreciation expense
Transaction Debit Credit Transaction
8 120
120
Accumulated depreciation
Transaction Debit Credit Transaction
120 8
120