Tutorial Solution - Balance Sheet 1

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ACROSS DOWN
1. materials and goods required in order 2. are those to whom the organisation
to produce for, and supply to, the owes money, perhaps through having
customer purchased goods or services on credit
so that payment is still outstanding.
3. represent the salary taken out of an
unlimited liability firm by its 3. are the people who owe money.
proprietors.

4. along with cash, this is the most 6. a type of fixed asset.

liquid of assets.
9. the ability of a firm to meet its short-
5. is an abbreviation which means the term debts. As bills can only be paid
same as sales revenue with cash, this term can also be
understood as the availability of cash or
7. along with bank, this is the most near cash resources.
liquid of assets.

8. a debt that may have to be paid

within 12 months (current), after 12
months (long-term), or at no
specified time (shareholders’ funds).

10. are costs that are not generated

directly by the production process,
often referred to as expenses.
2) Royce’s Executive is a coach company based in Rugby in the Midlands. It is owned by
Joshua Nuttall who used £30 000 of his own money to set up the business in 2010. The
company runs day trips to Stratford-Upon-Avon and the Cotswolds and weekend excursions
to places such as Bath, York and London.

The following details also relate to this company.

 Three coaches are owned by the company.

 £15 000 is owed to the bank – The Royal Bank of Scotland

 £5 000 is owed to Joshua’s mother

 There is £678 in Royce’s bank account.

 A customer owes Royce’s £15 for a trip

 Royce’s own a computer worth £1 000

 Royce’s owe £250 to a local garage for diesel

A. Which of the items below are Royce’s fixed assets?

a. Three coaches are owned by the company.

b. £15 000 is owed to the bank – The Royal Bank of Scotland
c. £5 000 is owed to Joshua’s mother
d. There is £678 in Royce’s bank account.
e. A customer owes Royce’s £15 for a trip
f. Royce’s own a computer worth £1 000
g. Royce’s owe £250 to a local garage for diesel

B. Which of the items below are Royce’s current assets?

a. Three coaches are owned by the company.

b. £15 000 is owed to the bank – The Royal Bank of Scotland
c. £5 000 is owed to Joshua’s mother
d. There is £678 in Royce’s bank account.
e. A customer owes Royce’s £15 for a trip
f. Royce’s own a computer worth £1 000
g. Royce’s owe £250 to a local garage for diesel

C. What is the value of Royce’s liabilities?

a. £20 250
b. £20 500
c. £20 000
 D. Use the accounting equation

Assets = Liabilities + Capital

to calculate the value of Royce’s coaches(x).

Assets Liabilities Capital

coaches computer bank debtor RBS mother garage capital

x + 1,000 + 678 + 15 = 15,000 + 5,000 + 250 + 30,000

Answer: £48,557

3) From the data provided use the accounting equation

Fixed Assets + Current Assets = Current Liabilities + Long Term Liabilities + Capital

to work out the missing value.

£
Machinery 90
Stock 30
Bank 15
Fixture and fittings 25
Vehicles 30
Debtors 30
Land and buildings 100
Long term loan 75
Trade creditors 25
Bank overdraft 0
Share capital X

Answer: £220
4) From the data provided use the accounting equation

Fixed Assets + Current Assets = Current Liabilities + Long Term Liabilities + Capital

to work out the missing value.

£
Machinery 100
Stock 15
Bank 15
Fixture and fittings 30
Vehicles 50
Debtors 30
Land and buildings 100
Long term loan 100
Trade creditors x
Bank overdraft 0
Share capital 215

Answer: £25
5) Kelly started in business as a wholesale stationer on 1 January 2022. She called her business
Kelly’s Stationary. She paid into a business bank account £200 000 as the initial capital of the
business.

By 31 December 2022, the business had made a profit of £24 000.

At 31 December 2022 the following assets and liabilities were recorded in the accounting
records of the business.

£
Stocks of stationary 70 000
Premises 120 000
Bank overdraft 7 000
Loan from Uncle Fred (repay in 10 years) 46 000
Fixtures and Fittings 30 000
Cash in hand 2 000
Owing to creditors 8 000
Delivery vans 48 000
Owed by debtors 15 000

Required:
a. Classify the items listed above into:
Fixed assets
Current assets
Current liabilities
Long-term liabilities

b. Prepare a balance sheet as at 31 December 2022, grouping the items into their proper
classifications.

c. State what the effect on the balance sheet would be if the proprietor withdrew cash of
£15 000 for her own personal use.

£
Stocks of stationary (current asset) 70 000
Premises (fixed asset) 120 000
Bank overdraft (current liability) 7 000
Loan from Uncle Fred (long-term liability) 46 000
Fixtures and Fittings (fixed asset) 30 000
Cash in hand (current asset) 2 000
Owing to creditors (current liability) 8 000
Delivery vans (fixed asset) 48 000
Owed by debtors (current asset) 15 000
 KELLY’S STATIONARY
BALANCE SHEET AS AT 31 DECEMBER 2022

FIXED ASSETS
Premises 120 000
Fixtures and Fittings 30 000
Delivery Vans 48 000
198 000

CURRENT ASSETS
Stock of stationary 70 000
Debtors 15 000
Cash in hand 2 000
87 000

LESS CURRENT LIABILITIES

Creditors 8 000
Bank Overdraft 7 000
15 000
72 000
270 000
LONG TERM LIABILITIES
Loan from Uncle Fred (46 000)
Total Net Assets 224 000

FINANCED BY
Capital at 1 January 2022 200 000
Add Net Profit 24 000
224 000

(c) Reduce Bank by £15,000, (or in this case – it will increase overdraft by £15,000), and
reduce Capital by £15,000, (i.e. the balance sheet will still balance).