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| Introduction to the Balance Sheet and Income Statement | |
| An exercise devised and prepared by Duncan Williamson | |
| Click here to go to the balance sheet blank answer forms | |
| This sheet contains a very good case/exercise to be used with students of accounting | |
| and bookkeeping who are starting to learn the basics of financial accounting. The case | |
| is suitable for those simply wishing to learn the basics of final accounts AND for students | |
| who wish to learn the basics of final accounts and then move on to double entry | |
| bookkeeping. | |
| I have used this case many times with undergraduate, post graduate and accounting | |
| for non financial managers students. The case can, therefore, be used at many levels | |
| of ability and experience. | |
| The case is suitable for use with GCSE and A Level Business Studies and Accounting | |
| students; and for students of engineering, science or other non business subjects at any | |
| level. | |
| Whilst the case is based on British accounting final accounts layout, it can easily be | |
| adapted for use in any other country. | |
| Structure of the file | |
| 1 | Intro & Question Sheet: the basic transactions for an imaginary business for an accounting |
| period. | |
| 2 | Blanks Sheet: the blank balance sheet and income statement sheets ready for students! |
| 3 | Balance Sheets sheet: the balance sheets presented on a day by day/transaction |
| by transaction basis; and the Income Statement for the entire period (there are two | |
| versions of the Income Statement: different layouts, same answer!). This sheet is | |
| designed so that teachers and lecturers can copy this directly onto an OHP slide ready | |
| for presentation to a class. Printing size may vary and may need adjustment for large room | |
| presentations. | |
| 4 | Annotations Sheet: each transaction is annotated with relevant account |
| classifications and examples of the accounting concepts relevant to example | |
| transactions. | |
| Finally, the entire sheet has been formatted for printing along the lines of the ideas | |
| and instructions detailed above. | |
| Introduction to the Balance Sheet and Income Statement | |
| David Tasker operates a wholesale company trading under the name of Burnall Trading. The company employs (among others) Ivan Stremski as a Sales Manager. Draw up the final accounts of the business after each of the following transactions - where necessary. | |
| JANUARY | |
| Date | Details |
| 1 | Tasker starts the business with £ 7,000 in a bank account for the business |
| 2 | the company buys fixtures and fittings by cheque £ 3,000 |
| 3 | Stremski resigns |
| 4 | Tasker withdraws £ 1,000 from the bank for his personal use |
| 5 | the company buys land for £ 7,000: £ 2,000 is paid by cheque immediately and £ 5,000 is paid for by means of taking out a mortgage secured on the property |
| 6 | the company buys goods on credit for £ 1,000 |
| 7 | Tasker is offered £ 7,000 for his business but refuses to sell |
| 8 | the company sells for cash for £ 600, goods which had cost £ 500 |
| 9 | Tasker is told that land similar to his was sold recently for £ 8,000: whilst Tasker is interested in this news, he takes no action on it. |
| 10 | goods are sold on credit for £ 600 which had cost £ 500 |
| 11 | debtors pay their debts in cash £ 600 |
| 12 | a customer, Sasha Zalevski, pays £ 1,200 cash for goods to be supplied after 10 days |
| 13 | the company pays £ 2,100 cash into the bank and draws a cheque for £ 1,000 to pay for goods bought on the 6th |
| 14 | goods are bought on credit for £ 2,000 |
| 15 | goods costing £ 1,000 were delivered to Sasha Zalevski in full settlement of the outstanding advance of the 12th |
| 15 | Tasker decides to calculate his profit so far. He reads the electricity meter and finds the business has used £ 10 worth of electricity. The electricity bill will not be received until the end of January |
| 15 | salaries to date paid in cash £ 50 |
| 15 | the rate of interest on the mortgage is 12% pa, payable on 31st December. Tasker calculates the appropriate charge for the month to be £ 25: charge this amount in full |
| 15 | Tasker assesses the value of the use of the fixtures and fittings to be £ 25 |
