BOOK KEEPING FORM ONE – 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

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

EXAMPLE.2

  From the information prepare Trading, profit and loss account and balance sheet as at 30th December 2006.

 
 

Solution.QN2

                                                                                DR   TRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR END OF 2006   CR

                                                                                                                                      BALANCE SHEET AS AT 31st Dec 2006

EXERCISE. 1       
 

                                                                         JUSTINA NYAMAI TRIAL BALANCE AS AT 31 DEC 2000

                  
 

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                       

 
 

                                                                                                                    BALANCE   SHEET   AS AT 31 DEC. 2000

 
 

      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

                 

                                                                                DR       TRADING, PROFIT AND LOSS ACCOUNT FOR THE                                                   CR  

                                                             YEAR ENDED 2006                                                             Details/Particular

 
 

                                                                                                    BALANCE   SHEET AS    AT    30TH SEPT 1998      

 
 

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          

                      
                                                                                                   DR                    CAPITAL     ACCOUNT       2                        CR

 
 

                                                                    DR                             FURNITURE AND FITTING ACCOUNT 3                                            CR

                 
                                                                                            DR                          PURCHASES ACCOUNT   4                               CR

               
                                                                                     DR                             SALES   ACCOUNT      5                                 CR

                    
                                                                                                   DR                     ADVERTISING ACCOUNTS   6                 CR

                 
                                                                                                 DR                         TRANSPORT ACCOUNT 7                        CR

 
 

                                                                                          DR                           RENT ACCOUNT  8                          CR

                                                                                         DR                           WAGES   ACCOUNT 9                               CR

 
 

                                                                                                                    TRIAL BALANCE AS AT 31TH JUNE

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                         

 
 

Solution 1.2

   DR                                         CASH A/C    (L 1)                                                    CR

Solution 2.1