Accounting Assignment: Ledger Accounts, Trial Balance, and Statements

This accounting assignment provides a comprehensive solution to various accounting tasks. It begins with recording, balancing, and closing ledger accounts, followed by the formulation of trial balances, and the preparation of profit and loss accounts and balance sheets for different companies (Maxim, Pendo, Mafuta, and Ricardo). The assignment covers journal entries, ledger accounts, trial balances, income statements, and statements of financial position. It also includes the differentiation between revenue and capital expenditure. The solution demonstrates the complete accounting cycle, providing detailed workings and explanations for each step, making it a valuable resource for students studying accounting principles and practices.

Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
a) Recording, balancing and closing ledger accounts for company.............................................3
b) Formulation of trail balance....................................................................................................5
c) Preparing of Profit and loss account and balance sheet...........................................................6
TASK 2............................................................................................................................................6
a) Maintaining general ledger accounts for Pendo......................................................................6
b) Balancing and maintaining trail balance.................................................................................9
c) Preparing of P&L account and statement of financial position.............................................10
TASK 3..........................................................................................................................................11
a) Balancing and closing ledger accounts for Mafuta................................................................11
b) Recording of trial balance......................................................................................................13
c) Formulation of Income statement and statements of financial position................................14
........................................................................................................................................................14
TASK 4..........................................................................................................................................14
1. Preparation of ledger accounts and extracting trail balance for Ricardo...............................14
TASK 5..........................................................................................................................................17
Difference between revenue and capital expenditure................................................................17
CONCLUSION..............................................................................................................................20

INTRODUCTION
Financial statements are the reports prepared by the managers of an organisation which
helps them in measuring the cash flow position of the recorded business transactions (Ainsworth
and Deines, 2019). This is a tool used for analysing as well as interpreting the monetary
transactions performed by an entity during an accounting year. It includes preparing balance
sheet, profit & loss account, cash flow statement etc. For this purpose, generally the management
team of any organisation hire specialised personnels i.e. accountants who can monitor and
produce the financial statements of the company. The major purpose of this tool is to provide
information regarding the financial position of a company i.e. how well a firm is able to measure
its liquidity & profitability position for the forthcoming period.
TASK 1
a) Recording, balancing and closing ledger accounts for company.
Journal entry: This is consider to be the main of first step of accounting which is related
with recording of crucial business transaction and happening during a specific period
(Armstrong, 2017). In companies, there are number of business transaction that are happening
throughout the year so general entry helped to show the changes in event during an accounting
year.
Journal entries for Maxim:
Date Journal entry Debit (£) Credit(£)
05/04/19 Cash Account Dr 300
To capital Account 300
07/04/19 Purchase Account Dr 200
To cash Account 200
08/04/19 Cash Account Dr 250
To loan Account 250
15/04/19 Motor van Account Dr 150
To cash Account 150
20/04/19 Cash Account Dr 350
To sales Account 350
28/04/19 Rent Account Dr 50

To Cash Account 50
29/04/19 Loan Account Dr 200
To cash Account 200
30/04/19 Drawing Account Dr 60
To cash Account 60
Total 1560 1560
Ledger account: It is an account that is used to sort, summarise and store valuable
dealing of business in context of financial data with all necessary debit and credit accounts which
are beneficial to prepare to trail balance (Chiapello, 2017).
Cash A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
05/04/19 To capital
Account
300 07/04/19 By purchase
Account
200
08/04/19 To loan Account 250 15/04/19 By Motor van
Account
150
20/04/19 To sales
Account
350 28/04/19 By rent Account 50
29/04/19 By loan Account 200
30/04/19 By Drawing
Account
60
30/04/19 By balance c/d 240
900 900
Loan A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
29/04/19 To cash Account 200 08/04/19 By cash Account 250
30/04/19 To balance c/d 50

250 250
Drawing A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
30/04/19 To cash Account 60 30/04/19 By balance c/d 60
60 60
Purchase A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
07/04/19 To cash Account 200 30/04/19 By balance c/d 200
200 200
Capital A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
30/04/19 To balance c/d 300 05/04/19 By cash account 300
300 300
Rent A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
28/04/18 To cash account 50 30/04/18 By balance c/d 50
50 50
Motor van A/c

Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
15/04/19 To cash Account 150 30/04/19 By balance c/d 150
150 150
Sales A/c
Dr. Cr.
Date Particular Amount (£) Date Particular Amount (£)
30/04/19 To balance c/d 350 20/04/19 By cash 350
350 350
b) Formulation of trail balance
Account Title Debit Credit
Cash Account 240
Purchase Account 200
Loan Account 50
Motor van Account 150
Capital Account 300
Sales Account 350
Drawing Account 60
rent Account 50
Total 700 700
c) Preparing of Profit and loss account and balance sheet.
Particular Amount (£)
sales 350
Less: Cost of goods sold 100
Gross profit 250
Less: Rent paid 50
net profit 200

Working notes
Particulars Amount
opening stock 0
Add: Purchases 200
Less: closing stock 100
Cost of goods sold 100
Statement of financial position
Assets Amount Liabilities Amount
Non-current assets capital 300
Motor van 150 Less : Drawings 60
Current assets Add: net profit 200
inventory 100 440
cash 240 loan 250
Less : repaid 200
50
Total 490 Total 490
TASK 2
a) Maintaining general ledger accounts for Pendo
SALES ACCOUNT
Dr. Cr.

b) Balancing and maintaining trail balance

c) Preparing of P&L account and statement of financial position.

TASK 3
a) Balancing and closing ledger accounts for Mafuta
Cash A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/19 To balance B/d 343 05/01/19 By wages
Account
12
07/01/19 To smith Account 18 09/01/19 By Max Account 21
11/01/19 To sales Account 64 14/01/19 By wages
Account
14
21/01/19 To sales Account 110 15/01/19 By Rich Account 162
23/01/19 To Harvey
Account
25 20/01/19 By office desk
Account
32
28/01/19 To sales Account 84 21/01/19 By wages 17

Account
31/01/19 To sales Account 30 23/01/19 By office
expense Account
3
28/01/19 By wages
Account
15
14/01/19 By purchase
Account
75
31/01/19 By balance c/d 323
674 674
Furniture and fitting A/c
Dr. Cr.

Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/19 To balance b/d 198 31/01/19 By balance c/d 198
198 198
Inventory A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/18 To balance B/d 458 31/01/18 By Cost of goods
sold
84
31/01/18 By balance c/d 374
458 458
Moon a/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/19 To balance B/d 26 31/01/19 By balance c/d 26
26 26
Smith A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/19 To balance B/d 18 07/01/19 By cash Account 18
18 18

b) Recording of trial balance.
Trial balance for the month ending on 31 January
Account Title Debit credit
Cash Account 323
sales Account 412
wages Account 58
Office expense Account 3
Office desk Account 32
Harvey Account 138
Purchase Account 225
Inventory Account 374
furniture and fittings Account 198
Moon Account 26
Capital Account(Balancing
figure)
965
Total 1377 1377
c) Formulation of Income statement and statements of financial position.

TASK 4
1. Preparation of ledger accounts and extracting trail balance for Ricardo.
Sales a/c
Dr. Cr.
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
Dr. Cr.
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 22
To Claire –
Receivables 1000 Jun, 27 By Trading a/c 1000

Purchase a/c
Dr. Cr.
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
Dr. Cr.
Date Particular
Amount
(£) Date Particular
Amount
(£)
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
Dr. Cr.
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
Dr. Cr.
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
Dr. Cr.
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
Hywel – receivable a/c
Dr. Cr.
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 14 To Sales a/c 9000 Jun, 25 By Cash a/c 9000
Mandy – receivables a/c
Dr. Cr.
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
Dr. Cr.
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
Dr. Cr.
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
Trial balance at 27 June
Particulars Debit Credit
Sales a/c 28500
Purchase a/c 16500
Cash a/c 6555
Sales return a/c 1000
Mandy – Receivable 5000
Discount allowed a/c 930
Discount Received a/c 375
29430 29430

TASK 5
Difference between revenue and capital expenditure
Expenditure: In business term, payment or cash-equivalent that are spend by companies
in order produce number of valuable goods and services (Correa and Larrinaga, 2015). It is
consider to be the charge or fee against available of funds in reference of an obligation that is
being collected from an invoice, voucher, receipts. There are usually two kind of expenditure
that are discussed below:
Revenue expenditure: Revenue expenditure or spending seems to be the expense of an
organization to finish its administrative operations (Revenue Expenditure, 2019). This cost is
linked to a business periodic day-to-day activities because they can function efficiently. In
several cases, this expense can be referred to as the operating expenses. This cost is recurring and
short-term cost and are essential for an organization to fulfil the periodic operating costs
generally subtracted in full during the same year in which expenditures were incurred (Duff,
2016). This is a prevalent occurrence that these costs are not linked to any assets but will be
included in income expenditures for normal expenditures linked to these investments. With
regard to the auditing treatment of these expenditures, they are reported under the heading of
costs and several deductions in the income statement. These costs does not provide any
immediate value into an asset's helpful life, as they can be generated only because of an asset and
are not directly correlated to an attribute within company. These expenses are majorly discussed
in the scenario of fixed assets which take place after the utilisation of fixed assets into a
respective service and it support to keep an assets in working order.
Capital expenditure: It is related with the funds that are being used by an organisation in
order to upgrade, acquire and maintain most important physical assets like building, plant,
machinery, property and equipment (Capital Expenditure, 2019). This is a wide classification of
expense that involves all expenditure on resources that can assist improve an organization's
capital. These costs are centred on productive resources that have been generally used for a
number of years and have a lengthy life. In order to obtain an investment and strengthen that
asset, capital investment is made. This sort of asset is sometimes referred to as tangible asset or
capital asset because it affects the corporate organization's resources and also leads to increased
assets.
There are number of benefit of capital expenditure such as:

 Long term effects: It improve the budgeting process of a business firm so that long term
strategic goals can be achieved.
 Depreciation: It lead to rise the assets accounts of company, as soon as an assets is put
into service the depreciation (Parker and Northcott, 2016).
The following task relates to a differentiation between revenue and capital expenditure
with reference to International Accounting Standards (IAS).
Accounting norms are the laws and regulations enforced on each company organization
to ensure compliance and consistency in all company economic accounts. These norms are a
collection of regulations recognized as IFRS. Global financial standards and practices, the
guidelines provided by the panel of IAS.
Basis Revenue expenditure Capital expenditure
Capitalisation These kind of expenses are not
consider as capitalised because
they are majorly used for short
term for one of less than a year
(Weetman, 2019).
Companies primarily use these
expenses to get fixed assets. As per
the IAS, assets that are capitalised
must be depreciated which support to
figure out the usefulness of expenses.
Accounting
treatment
These expenses are basically
transcribed into income statements
that are treated as cost expenses for
that period.
From the standard of IFRS, these
expenses are mainly recorded within
income statements. Afterwards these
are consider as the part of balance
sheet under the heading of fixed
assets.
Earning
capacity
Revenue expenditure do not
require to increase the capability of
an assets in order to gain the extra.
The most important is that it help
to hold the earning capacity of a
valuable assets to company.
These type of expenses are able to
increase or rise the earning capacity
of assets which is directly related to
raise the income of company. In the
context of capital expenses IFRS
define them as the expenses which
are included to improve the ability of
fixed assets which aid to earn more.