Accounting: Ledger Accounts, Trial Balance, Statements, Revenue vs Capital Expenditure

This report provides an overview of accounting concepts such as ledger accounts, trial balance, financial statements, and the difference between revenue and capital expenditure. It includes examples and explanations of these concepts using different traders' financial records. The report emphasizes the importance of accurate financial reporting for making informed business decisions.

Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(a) Ledger accounts of Maxim....................................................................................................2
(b) Trial balance of Maxim ........................................................................................................3
(c) Final Statements of maxim....................................................................................................3
TASK 2............................................................................................................................................3
(a) Ledgers accounts of Pendo....................................................................................................5
(b) Trial balance of Pendo...........................................................................................................6
(c) Income statement of Pendo....................................................................................................6
TASK 3............................................................................................................................................7
(a) Ledger accounts of Mafuta....................................................................................................7
(b) Trial balance of Mafuta.........................................................................................................9
(c) Financial position statement of Mafuta.................................................................................9
TASK 4..........................................................................................................................................10
(a) Ledger accounts of Ricardo.................................................................................................10
(b) Trial balance of Ricardo......................................................................................................12
TASK 5..........................................................................................................................................13
Differentiate between revenue expenditure and capital expenditure........................................13
CONCLUSION .............................................................................................................................15
REFERENCES .............................................................................................................................16

INTRODUCTION
Accounting is defined as the process of correctly recording, posting, communicating and
reviewing the overall information related with business financial transaction within a specific
time frame (Accounting, 2019). This include the preparation of valuable financial documents
such as income statements, balance sheet and cash flow statement which support in making
better decision for future profitability. Accounting is mainly depended upon the fundamental that
help in making a successful business by keeping authentic and reliable reports.
In this report, ledger accounts, statement of P&L, trail balance and statement of financial
position are prepared for different traders. In addition, difference between capital and revenue
expenditure are discussed in this report.
TASK 1
Journal entries
Date Particulars Debit (£) Credit (£)
April, 5 Cash A/c 300.00
To Capital a/c 300.00
April, 7 Purchase a/c 200.00
To cash a/c 200.00
April, 8 Cash a/c 250.00
To Loan from Tatiana 250.00
April, 15 Motor van a/c 150.00
To cash a/c 150.00
April, 20 Cash A/c 350.00
To sales a/c 350.00
April, 28 Rent a/c 50.00
To cash a/c 50.00
April, 29 Loan a/c 200.00
To Cash A/c 200
April, 30 Drawings a/c 60.00
To cash a/c 60.00
1

(a) Ledger accounts of Maxim
Rent a/c
Date Particular Amount (£) Date Particular Amount (£)
April,28 To cash a/c 50 April,30
By profit & loss
a/c 50
Drawings a/c
Date Particular Amount (£) Date Particular Amount (£)
April, 30 To Cash a/c 60
Sales a/c
Date Particular Amount (£) Date Particular Amount (£)
April,30 By Trading a/c 350 April,20 To cash a/c 350
2

(b) Trial balance of Maxim
Trail balances at April,30
Particulars Debit (£) Credit (£)
Cash A/c 240
Capital a/c 300
Purchase a/c 200
Loan a/c 50
Motor van a/c 150
Rent a/c 50
Sales a/c 350
Drawings a/c 60
Total 700 700
(c) Final Statements of maxim
Statement of profit & loss a/c
Particulars Amount
Sales a/c 350.00
Less – Cost of goods sold 100.00
Gross Profit 250.00
Less – Expenses
Rent a/c 50.00
Net Profit 200.00
Statement of Financial position as at April, 30
Amount
Non Current assets
Motor van 150.00
Current Assets
Cash A/c 240.00
Inventory 100.00 340.00
3

Total Assets 490.00
Capital a/c 300.00
Add – Net Profit 200.00
Less – Drawings 60.00 440.00
Current Liabilities
Short term loan 50.00
Total Liabilities 490.00
TASK 2
Journal entries
Date Particulars Debit (£) Credit (£)
January, 1 Cash a/c 5000.00
To capital a/c 5000.00
January, 2 Motor van a/c 600.00
To cash a/c 600.00
January, 3 Purchase a/c 1300.00
To cash a/c 1300
January, 4 Cash a/c 1000.00
To loan from Sergei 1000.00
January, 10 Motor van expenses a/c 200.00
To cash a/c 200.00
January, 13 Cash a/c 300.00
To sales a/c 300.00
January, 20 Cash a/c 500.00
To sales a/c 500.00
January, 24 Storage expenses a/c 150.00
To cash a/c 150.00
January, 27 Loan a/c 350.00
To Cash a/c 350.00
4

January, 30 Drawings a/c 175.00
To Cash a/c 175
(a) Ledgers accounts of Pendo
Loan from Sergei a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 27 To cash a/c 350 Jan, 4 By cash a/c 1000
Jan, 31 To Balance c/d 650
1000 1000
Feb, 1 By Balance b/d 650
5

(b) Trial balance of Pendo
Trial Balance at 31 January
Particulars Debit (£) Credit (£)
Cash a/c 4025
Capital a/c 5000
Motor van a/c 600
Purchase a/c 1300
Loan from Sergei a/c 650
Motor van expenses a/c 200
Sales a/c 800
Storage expenses a/c 150
Drawings a/c 175
6450 6450
6

(c) Income statement of Pendo
Statement of Profit and Loss
for the month ended 31 January
Particulars Amount (£) Amount (£)
Sales a/c 800.00
Less – Cost of Goods sold 500.00
Gross Profit 300.00
Less- Expenses
Motor van expenses 200.00
Storage expenses 150.00 350.00
Net Loss 50.00
Statement of financial position at January, 31
Particulars Amount (£) Amount (£)
Non Current assets
Motor Van 600.00
Current assets
Cash 4025.00
Closing Stock 800.00 4825.00
Total assets 5425.00
Capital account 5000.00
Less- Net loss 50.00
Less – Drawings 175.00 4775.00
Current liabilities
Short term loan 650.00
Total Liabilities 5425.00
Working Notes: Cost Of goods sold = Purchase – Closing inventories
= 1300.00 – 800.00 = 500.00
7

TASK 3
(a) Ledger accounts of Mafuta
Cash a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 343 Jan, 5 By Wages a/c 12
Jan, 7 To Smith's a/c 18 Jan, 9 By Max's a/c 21
Jan, 11 To Sales a/c 64 Jan, 14 By Wages a/c 14
Jan, 21 To Sales a/c 110 Jan, 14 By Purchases a/c 75
Jan, 23 To Harvey's a/c 25 Jan, 15 By Rich's a/c 162
Jan, 28 To Sales a/c 84 Jan, 20
By Fixtures and
fittings a/c 32
Jan, 31 To Sales a/c 31 Jan, 21 By Wages a/c 17
Jan, 23 By office expenses a/c 3
Jan, 28 By Wages a/c 15
Jan, 31 By Balance c/d 323
674 674
Feb, 1 To Balance b/d 323
Capital a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Payables 33 Jan, 1 By Cash in hand a/c 343
Jan, 31 To balance c/d 1049 By Inventory 458
By Furniture and
fittings 198
By Receivables 83
1082 1082
Fixtures and fittings a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 198 Jan, 31 By Balance c/d 230
Jan, 20 To cash a/c 32
230 230
8

Feb, 1 To Balance b/d 230
Sales a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 31 To Trading a/c 412 Jan, 2 By Harvey's a/c 124
Jan, 11 By Cash a/c 64
Jan, 21 By Cash a/c 110
Jan, 28 By Cash a/c 84
Jan, 31 By Cash a/c 30
412 412
Wages a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 5 To cash a/c 12 Jan, 31 Profit and loss a/c 58
Jan, 14 To cash a/c 14
Jan, 21 To cash a/c 17
Jan, 28 To cash a/c 15
58 58
Purchase a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 5 To Rich's a/c 150 Jan, 31 By Trading a/c 225
Jan, 14 To cash a/c 75
225 225
Office Expenses a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 23 To cash a/c 3 Jan, 31 Profit and loss a/c 3
Receivables from Smith's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan,1 To Balance b/d 18 Jan, 7 By Cash a/c 18
Receivables from Harvey's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 39 Jan, 23 By Cash a/c 25
Jan, 2 To Sales a/c 124 Jan, 31 By Balance c/d 138
9

163 163
Feb, 1 To Balance b/d 138
Receivables from Moon's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 26 Jan, 31 By Balance c/d 26
Feb, 1 To Balance b/d 26
Payable to Rich's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 15 To cash a/c 162 Jan, 1 By Balance b/d 12
Jan, 5 By purchase a/c 150
162 162
Payable to Max's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 9 To cash a/c 21 Jan, 1 By Balance b/d 21
Inventory a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 458 Jan, 31 By Trading a/c 458
Jan, 31 To Trading a/c 374 Jan, 31 By Balance c/d 374
Feb, 1 To Balance b/d 374
(b) Trial balance of Mafuta
Trial Balance at 31 January
Particulars Debit (£) Credit (£)
Cash in hand a/c 323
Capital a/c 1049
Fixtures and fittings a/c 230
Sales a/c 412
Wages a/c 58
Purchase a/c 225
10

Office expenses a/c 3
Receivables a/c
Harvey 138
Moon 26
Inventory a/c 458
1461 1461
(c) Financial position statement of Mafuta
Statement of Profit and Loss
For the month ended 31 January
Particulars Amount (£)
Sales 412
Less- Cost of goods sold 309
Gross profit 103
Less – Expenses
Wages 58
Office Expenses 3 61
Net Profit 42
Statement of Financial position at 31 January
Particulars Amount (£)
Non current assets
Fixtures and fittings 230
Current assets
Inventory 374
Trade receivables (138+26) 164
Cash 323 861
Total Assets 1091
Capital account 1049
Add – Net Profit 42 1091
Total Liabilities 1091
11

Working Note: Cost of goods sold = Opening inventories + Purchase – Closing stock
= 458 + 225 – 374 = 309
TASK 4
(a) Ledger accounts of Ricardo
Sales a/c
Date Particular Amount (£) Date Particular
Amount
(£)
Jun, 27 To Trading a/c 28500 Jun, 2 By Claire – Receivable a/c 8500
Jun, 14
By Hywel – Receivable
a/c 9000
Jun, 20 By Cash a/c 6000
Jun, 24
By Mandy – Receivable
a/c 5000
28500 28500
Sales Returns a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 22
To Claire –
Receivables 1000 Jun, 27 By Trading a/c 1000
Purchase a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 13
To Georgina –
Payable a/c 12000 Jun, 27 By Trading a/c 16500
Jun, 21
To Andrew – Payable
a/c 4500
16500 16500
Cash a/c
Date Particular Amount Date Particular Amount
12

(£) (£)
Jun, 20 To Sales a/c 6000 Jun, 25
By Georgina – Payable
a/c 11160
Jun, 24
To Claire –
Receivable 7125 Jun, 27
By Andrew – Payable
a/c 4410
Jun, 25
To Hywel –
Receivables 9000 Jun, 27 By Balance c/d 6555
22125 22125
To Balance b/d 6555
Discount allowed a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun,24
To Claire –
Receivable 375 Jun, 27 By Profit and loss a/c 375
Discount received a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 27 To Profit & loss a/c 930 Jun, 25
By Georgina – Payable
a/c 840
Jun, 27
By Andrew – Payable
a/c 90
930 930
Claire – receivable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 2 To Sales a/c 8500 Jun, 22 By Sales return a/c 1000
Jun, 24 By Cash a/c 7125
Jun, 24 By Discount allowed a/c 375
8500 8500
13

Hywel – receivable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 14 To Sales a/c 9000 Jun, 25 By Cash a/c 9000
Mandy – receivables a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 24 To Sales a/c 5000 Jun, 27 By Balance c/d 5000
To Balance b/d 5000
Georgina – payable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 25 To Cash a/c 11160 Jun, 13 By Purchase a/c 12000
Jun, 25
To Discount received
a/c 840
12000 12000
Andrew – payable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 27 To Cash a/c 4410 Jun, 21 By Purchase a/c 4500
Jun, 27
To Discount received
a/c 90
4500 4500
(b) Trial balance of Ricardo
Trial balance at 27 June of Ricardo
Particulars Debit Credit
Sales a/c 28500
Purchase a/c 16500
Cash a/c 6555
14

Sales return a/c 1000
Mandy – Receivable 5000
Discount allowed a/c 930
Discount Received a/c 375
29430 29430
TASK 5
Differentiate between revenue expenditure and capital expenditure
Revenue expenditure: In accounting term, the cost that have been charged to the
expenditure when actual expenses incurred (Flagan and Seinfeld, 2012). It is observed that
revenue expenses are regarded within the context of fixed assets such as when an assets is used
to provide a services so that income can be generated for company. Thus, business incurred
revenue expenditure in order to make a fixed assets working which help in generating the
revenues within the same accounting year. There are mainly two types of revenue expenses such
as:
 Maintenance of fixed assets: It mainly involves expenditure on maintenance and repair
of fixed assets used in a company which would directly help in making operation more
profitable. At the same time it does not extend the life of assets (Al-Hubaity and
Hamdoon, 2012). Growing income: Revenue expenses are related to day to day spending which are
required to make business operation more effective and efficient like salaries for sales
persons, offices equipments, rents and utilities.
Capital expenditure: It is related to the spending of company on acquiring of assets such
as building, land, machine, tool and equipments and most importantly investment within
appropriate shares (Halpin, Lucko and Senior, 2017). In accounting term, the money incurred on
rearing, buying, updating and improving the fixed assets of an organisation are known as capital
expenditure. These are expenses which are made by organisation on renovating any kind
obsolete or non functioning of assets so that they become usable and generate more income. It is
noticed that high capital spending generally means further investment to improve infrastructure
as well as other resources which are critical for growth.
Difference between capital and revenue expenditure
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Basis Capital Expenditure Revenue Expenditure
Meaning According to the International
Accounting Framework Capital
Expenditure, these investments
are invested to change company
assets and provide long-term
advantages (Miles, 2019).
Revenue spending is the normal
routine-based spending that is
deducted from the corresponding
income of company. It will actually
keep business activities running.
Based on It is not focused on regular
spending on a daily basis. It will
buy and accumulate long-term
fixed assets
This is based on the day-to-day
business spending such as
depreciation, marketing costs.
Earning capacity Using capital expenditure to
increase the business's earning
power of company.
With the aid of non-increasing
revenue expenditure, thus retaining
the companies' earning capacity
(Mitra, 2016).
Physical presence It has a physicality that does not
include current assets.
Revenue spending are mainly
lacking in physicality as used in
business operations.
Benefits For many years, it is providing
advantages, further than one year
of financial reporting.
It is provide benefit related
accounting year, short term time
period (Ragland and
Ramachandran, 2014). It gives
advantage to the company short
term in the same accounting year.
Term period Capital expenditure connected to
a significant period of time, thus
having a great-term impact on the
company (Mushahir Mohamed,
2012).
Revenue spending attributable to
short amount of time due to the
acquisition of its advantages, in
specific reporting period.
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Balance shown A small portion is paid as
depreciation for profit and loss
report. The capital structure
indicates less outstanding amount
after the payment.
There is a full amount paid to the
statement of profits. But the
statement of final position does not
reveal the information about
revenue expenses.
Frequency It does not includes frequency as
expenses can be different.
It includes frequency in expenses as
these are related with day to day
expenses (Simkin, Norman and
Rose, 2014).
Appearance These are majorly shown on the
balance sheet as an increment
within the total assets value.
This will show as a subtract interest
from earnings in the cash account
as well as in the income statement.
Examples Amount used in purchase of
equipment, land, building,
extension on assets, machinery
are treated as capital expenses.
Purchase of resale Stock,
depreciation, production cost like
rent, tax as well as commission
CONCLUSION
In conclusion, it has been stated that accounting fundamental are the main component of
a business that support in posting, assorting, assessing and analysing the financial document
prepared within a reporting year. Trail balance are mainly prepared to to figure out the difference
between the debit and credit amount, income statements shows the net profit or loss within a
year. Balance sheet describe the overall financial position of company as well as cash statements
shows the total amount of cash inflows and outflows within different activities. These financial
statements are compiled in compliance with the international financial norm as they should take
care of all accounting standards and criteria such as the market and accumulation basis. Capital
and revenue spending are essential for the company's performance and the generation of
financial gain in the long term.
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REFERENCES
Books and Journals:
Al-Hubaity, D. and Hamdoon, H., 2012. Elements of Zakat and its Fundamentals of Assessment
According to Accounting Viewpoint. TANMIYAT AL-RAFIDAIN, 34(109), pp.168-187.
Flagan, R. C. and Seinfeld, J. H., 2012. Fundamentals of air pollution engineering. Courier
Corporation.
Halpin, D. W., Lucko, G. and Senior, B. A., 2017. Construction management. John Wiley &
Sons.
Miles, W., 2019. Home prices and fundamentals: solving the mystery for the G-7 by accounting
for nonlinearities. International Journal of Housing Markets and Analysis.
Mitra, A., 2016. Fundamentals of quality control and improvement. John Wiley & Sons.
Mushahir Mohamed, A., 2012. Applying accounting fundamentals to calculate cost of equity
(with special reference to twelve listed companies in Colombo stock exchange in Sri
Lanka) (Doctoral dissertation, Faculty of Management and Commerce SEUSL).
Ragland, L. and Ramachandran, U., 2014. Towards an understanding of excel functional skills
needed for a career in public accounting: Perceptions from public accountants and
accounting students. Journal of Accounting Education, 32(2), pp.113-129.
Simkin, M. G., Norman, C.A.S. and Rose, J. M., 2014. Core concepts of accounting information
systems. John Wiley & Sons.
Winter, C. J., Sizmann, R. L. and Vant-Hull, L. L. eds., 2012. Solar power plants: fundamentals,
technology, systems, economics. Springer Science & Business Media.
Online
Accounting. 2019. [Online] Available Through:
<https://www.accounting-degree.org/what-is-accounting>.
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