Accounting for organisations with incomplete records flashcards

Topic 14: Accounting for organisations with incomplete records

Statement of affairs

A list of assets and liabilities at a date, set out like a statement of financial position. The balancing figure is capital.

Opening capital £24,000; closing £31,500; drawings £15,600; capital introduced £2,000. Profit?

Closing − opening + drawings − capital introduced = 31,500 − 24,000 + 15,600 − 2,000 = £21,100.

Receivables: opening £2,500, closing £3,100; receipts £28,700; irrecoverable debts £200. Credit sales?

28,700 + 200 + 3,100 − 2,500 = £29,500.

Payables £3,000 at the start and £3,600 at the end; payments £30,000; discounts received £250; contra £400. Credit purchases?

30,000 + 250 + 400 + 3,600 − 3,000 = £31,250.

Cash in hand: opening £120, closing £90. Banked £18,400; cash wages £5,200; drawings from the till £3,000. Cash takings?

18,400 + 5,200 + 3,000 + 90 − 120 = £26,570.

Cost of sales £45,000 with a 50% mark-up. Revenue? And revenue £72,000 at a 30% margin: cost of sales?

Revenue 45,000 × 150/100 = £67,500. Cost of sales 72,000 × 70% = £50,400.

Cost of sales £54,000; rate of inventory turnover 9 times; opening inventory £5,400. Closing inventory?

Average 54,000 ÷ 9 = £6,000. Closing = 12,000 − 5,400 = £6,600.

How do you find inventory lost in a fire?

Cost of sales from sales and the mark-up or margin; expected closing inventory = opening + purchases − cost of sales (− goods taken by owner); loss = expected closing − inventory saved, at cost.

Revenue £60,000; gross profit £21,000; profit in relation to revenue 15%. Total expenses?

Profit 60,000 × 15% = £9,000. Expenses 21,000 − 9,000 = £12,000.

Single entry vs double entry: one benefit and one limitation each

Single entry: cheap and simple, but no trial balance check, so errors and theft go unnoticed. Double entry: an arithmetic check and full statements, but more time, skill and cost.