John owns and manages a small business which sells organic beauty products to high street shops. John
Question:
John owns and manages a small business which sells organic beauty products to high street shops. John sells to the shops on credit at 30 days credit terms. (John manages all aspects of the business, including ordering, delivery and managing the accounts.) The business accounts are balanced at the end of each month, and the transactions are posted daily.
On 1 July, the balances on John's general ledger accounts were as follows:
| Account name | Debit (£) | Credit (£) |
| Capital | 63,000 | |
| Van (at net book value) | 30,000 | |
| Bank | 1,500 | |
| Receivables control | 62,000 | |
| Payables control | 30,500 | |
| 93,500 | 93,500 |
On 1 July, the debit balances on the receivables ledger accounts were as follows:
| Receivables ledger accounts | £ |
| Shampoo | 5,910 |
| Soap | 23,520 |
| Shower Gel | 32,570 |
| Total | 62,000 |
On 1 July, the credit balances on the payables ledger accounts were as follows:
| Payables ledger accounts | £ |
| Lemon | 4,601 |
| Rose | 25,899 |
| Total | 30,500 |
During July, the following transactions took place:
| No. | Date | Amount (£) | Transaction |
| 1 | 2 July | 5,200 | John pays the business rent from his personal bank account |
| 2 | 4 July | 2,800 | John receives payment from shop Shampoo in part settlement of amounts outstanding |
| 3 | 8 July | 9,000 | John sells goods to shop Soap on 30 days credit terms |
| 4 | 9 July | 32,570 | John receives payment from shop Shower Gel in full settlement of the amount outstanding |
| 5 | 11 July | 10,900 | John purchases goods from supplier Lemon on 30 days credit terms |
| 6 | 17 July | 11,200 | John pays to supplier Lemon by bank transfer in part settlement of amounts outstanding |
| 7 | 22 July | 25,899 | John pays by bank transfer the full amount outstanding on the account of supplier Rose |
| 8 | 28 July | 11,000 | John sells goods to shop Shampoo on 30 days credit terms |
Required:
a.Set out John's general ledger accounts and the receivables and payables ledger accounts on 1 July.
b. Balance off the general ledger accounts and the receivables and payables ledger accounts. Demonstrate that the balance on the receivables control account agrees with the total of the balances on the personal accounts in the receivables ledger. Do the same for the payables control account and the personal accounts in the payables ledger. Show all relevant details for all T-accounts.
c Present the trial balance at 1 August.
Expert Answer:
