Template - Revision Exercise 1

NAME _________________________________________________________
1. On 1 March 2017 Nabil started a business buying and selling office supplies on
credit.
Nabil opened a business bank account on 1 March 2017 with capital, $155 000
and a loan from AB Loans, $80 000. On the same day he purchased premises,
$200 000, fixtures and fittings, $22 000, and inventory, $5500, paying by cheque.
REQUIRED
(a) Prepare a journal entry to include all the above information to open the books
of the business on 1 March 2017. A narrative is required.
Nabil
Journal
2017 Details Debit Credit
$ $
(b) Name two uses of the general journal, apart from opening entries.
1……………………………………………………………………………………………………………………
2……………………………………………………………………………………………………………………[2]
Despite having little knowledge of book-keeping, Nabil decided to prepare a trial

balance at the end of his financial year on 28 February 2018.
Debit Credit
$ $
Revenue 119 100
Purchases 72 000
Capital 155 000
Loan – AB Loans 80 000
Premises 200 000
Fixtures and fittings 22 000
Trade receivables 7 600
Trade payables 6 850
Bank overdraft 3 950
Wages 32 300
General expenses 25 400
Inventory – 1 March 2017 5 500
– 28 February 2018 61 00
Difference on trial balance _______ 13 900
374 850 374 850
The trial balance he prepared, which contains errors, was as follows.
The following errors were later discovered.

1 Nabil’s cash drawings, $10 000, had been posted to the wages account.
2 No entry had been made for purchases returns, $150.
3 $140 owed by a credit customer should have been written off as a bad debt.
4 No entry had been made for bank charges, $210.
5 The balance of the petty cash book, $100, had been omitted from the trial
balance.
REQUIRED
(c) Prepare a corrected trial balance at 28 February 2018
Nabil
Corrected Trial Balance at 28 February 2018
Debit Credit
$ $
2. Mary keeps a full set of accounting records including books of prime entry.
(a) State two reasons why Mary uses books of prime (original) entry.
1…………………………………………………………………………………………………………………………
2…………………………………………………………………………………………………………………………
Mary had the following transactions during November.

1 Sold goods, $220, for cash
2 Returned goods costing $440, bought on credit from Jane
3 Purchased a motor vehicle on credit, $12 400, including road tax of $300, from
Speedy Motors
4 Received a cheque from Tan, a credit customer, in settlement of an invoice for
$400 after deduction of 2% cash discount

5 Took goods for own use, $120
REQUIRED
(b) Name the book of prime (original) entry where each of the transactions 1, 2
and 3 would be recorded
1…………………………………………………………………………………………………………………………
2…………………………………………………………………………………………………………………………
3…………………………………………………………………………………………………………………………
(c) Complete the following table to show how each transaction was recorded by
Mary. The first one has been completed as an example.
Account(s) debited $ Account(s) credited $
1 Cash 220 Sales 220
2
5
3. Suzi is a sole trader whose financial year ends on 31 January.
The following account appears in Suzi’s ledger.
John Karanda
2017 $ 2017 $
April 1 Sales 1 200 April 20 Sales returns 200
May 6 Bank (dis. cheque) 1 000 30 Bank 1 000
Dec 1 Cash 850
2018
_____ Jan 3 Bad debts 150
2 200 2 200
1. Explain each entry in John Karanda’s account as it appears in Suzi’s ledger
2. State where the double entry for each transaction would have been made.
(a) April 1 Sales
(b) April 20 Sales returns
(c) April 30 Bank
(d) May 6 Bank (dishonoured cheque)
(e) Dec 1 Cash
(f) Jan 3 Bad debts

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NAME _________________________________________________________

Despite having little knowledge of book-keeping, Nabil decided to prepare a trial

The trial balance he prepared, which contains errors, was as follows.

The following errors were later discovered.

Mary had the following transactions during November.

$400 after deduction of 2% cash discount

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