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Assignment 1

Leon buys and sells goods only on credit. Jay is one of Leon's credit suppliers. Leon had a balance owing of $1,250 to Jay on March 1. During March, Leon purchased $615 of goods from Jay on credit and returned $38 of faulty goods. On March 23, Leon paid Jay $1,225, deducting a 2% cash discount from the $1,250 balance. Jay's account in Leon's books would be maintained in the payables ledger. Trade discounts are offered to attract more customers and receive bulk orders, while cash discounts incentivize prompt payment.

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Meerab Mukhtar
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145 views

Assignment 1

Leon buys and sells goods only on credit. Jay is one of Leon's credit suppliers. Leon had a balance owing of $1,250 to Jay on March 1. During March, Leon purchased $615 of goods from Jay on credit and returned $38 of faulty goods. On March 23, Leon paid Jay $1,225, deducting a 2% cash discount from the $1,250 balance. Jay's account in Leon's books would be maintained in the payables ledger. Trade discounts are offered to attract more customers and receive bulk orders, while cash discounts incentivize prompt payment.

Uploaded by

Meerab Mukhtar
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment no.

1
Topics: Double entry book system Books of original entry
Q1) Complete the following document

(i) CREDIT Note


PR Supplies
12 High Street
London
Baines No. 111
14 Stopes Road
Birmingham B15 Date 12 February 2019
Unit Cost Total
Description Quantity
$ Cost $
Mobile 24 75
phones (ii)
1800
Subtotal
(iii)
1800
Trade discount 20%
(iv)
360
Total
(v)
1440
Reason: Faulty goods

Q2) Leon buys and sells goods only on credit.


(a) Complete the table.

Transaction Source document Book of original entry


Invoice Sales daybook
Sold goods
Received payment RECIEPT CASH BOOK
from customer
Purchased a non- JOURNAL
current asset on credit

On 1 March 2020 the balance owing by Leon to Jay, a credit supplier, was

$1 250. The following transactions took place during March 2020.

March Transaction
3 Purchased goods on credit, $615
8 Returned faulty goods, $38

Paid the balance at 1 March 2020 by direct debit after


23 deducting 2% cash discount.

(b) (i) Prepare Jay’s account. Balance the account on 31 March 2020 and
bring the balance down on 1 April 2020.
(6)
Jay’s Account

Date Details $ Date Details $


March 8 Returned 38 Balance b/d 1250
goods
Balance c/d 3052 March 2 Purchases 615
March 23 Bank 1225
3090 3090
Balance b/d 3052

(ii) Identify, indicating with a tick (ü), the ledger in which Jay’s account would be
maintained in Leon’s books.

Nominal ledger

Receivables ledger

Payables ledger
(c) State one reason why a business offers:

(i) trade discount: to attract more customers and receive the


order in bulk for increase in sales.
(ii) cash discount: gives customers an incentive to pay right
away, which means less time and money are spent in
the collections process.

Q3) Suda maintains a three-column cash book.


On 1 April 2020 the balances were cash in hand, $85, and bank overdraft,
$540 The following transactions occurred during April 2020.

April Transaction

Paid a cheque to Flolite after taking a cash discount of 3% in


4
full settlement of its account balance of $400

8 Sold goods for cash, $855

14 Paid cash into the bank, $900

16 Paid cash for stationery, $26


Received a cheque from Kai, $735, net of a cash discount of
24
2%

29 Paid wages by cheque, $418

30 Paid electricity by standing order, $600

(a) Prepare the cash book for the month of April 2020.
Balance the cash book on 30 April 2020 and bring the balance down on 1 May
2020

b) State the book of original entry for each transaction.

Transaction Book of original entry


Sales to a credit customer SALES DAY BOOK
Returns from a credit customer SALES RETURN DAY
BOOK
Purchases from a credit supplier PURCHASES DAY BOOK
Purchase of a non-current asset on credit GENERAL JOURNAL
Payment to a credit supplier CASH BOOK

Q4) Juliet maintains a


petty cash book with a

float of $150 The

following transactions

took place during April

2020.
Voucher
April Transaction $
number
5 401 Paid taxi fare 15.20
9 402 Purchased postage stamps 14.60
13 403 Paid employee travel expenses 25.00
22 404 Purchased envelopes 18.30
29 405 Paid cleaner’s wages 30.00
To be
30 Restored float to petty cash
calculated
a) Prepare the petty cash book for the month ended 30 April
2020.
Balance the petty cash book on that date and
bring the balance down on 1 May 2020.

(b) State one reason why the balance of the petty cash
book at 1 May 2020 may be different to the cash
held.
State where in the statement of financial position
at 1 May 2020 the balance of the petty cash
book
would be shown

Q5) Raheem maintains a three-column cash


book. On 1 April 2021 the balances were: bank
$110 overdrawn, cash $25 The following
transactions took place during April 2021.
April Transaction

3 Received a credit transfer from Joseph in full settlement of an invoice for


$1620. The receipt was after taking 10% cash discount.
12 Paid BL Council by standing order, $220

21 Sold goods for cash, $80

23 Transferred cash to bank, $65

27 Paid window cleaner by cash, $28

30 Paid AWB $2185 by cheque in full settlement of an invoice after taking 5%


cash discount.

(a) Enter the transactions in the three-column cash book


Balance the cash book on 30 April 2021 and bring the
balances down on 1 May 2021.
(b) Explain the benefits for Raheem of maintaining a petty cash book.
(c) Complete the table below to show the source document and the
book of original entry for each transaction.
Transaction Source document Book of original
entry
Paid bank charges BANK CASH BOOK
STATEMENT
Returned damaged goods to a credit DEBIT NOTE PURCHASES
supplier RETURN DAY
BOOK
Purchased a new motor vehicle on INVOICE JOURNAL
credit
Payment to a supplier by credit ] CASH BOOK
transfer

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