LEDGER ACCOUNT Trial balance

Debit (£)
Share capital (£1 per share)
Share premium
Trade payables
Land & Buildings – cost 21,000,000
Land & Buildings – accumulated depreciation at 1 January 2019
Equipment – cost 8,000,000
Equipment – accumulated depreciation at 1 January 2019
Motor vehicles - cost 1,300,000
Motor vehicles - accumulated depreciation at 1 January 2019
Trade receivables 3,500,000
8% bank loan repayable in 10 years
Cash at bank 988,000
Saving deposit 3,500,000
Retained earnings
Bank loan Interest paid 300,000
Revenue
Purchases 16,000,000
Distribution costs 2,500,000
Administrative expenses 2,320,000
Inventories as at 1 January 2019 1,800,000
Allowances for doubtful debts
Bad debt expense 55,500
Dividends paid 1,232,850
Suspense Account
62,495,850

No. Explanation
Opening inventory

1 Purchases

The inventory at close of business

No. Explanation

Depreciation of building

2
Depreciation of equipment

Depreciation of motor vehicles

 2

Depreciation of motor vehicles

No. Explanation

3 Advertising expenses

No. Explanation
4 Interest on the bank for last 6 months

No. Explanation
5 Corporation tax

No. Explanation

6 Issues of the ordinary shares

No. Explanation

7 Administrative expense
 Trial balance Adjustment
Credit (£) Debit (£) Credit (£)
10,000,000
11,912,200
1,950,000

2,000,000

1,600,000

600,000

7,500,000

2,350,000

24,500,000

30,000

53,650
62,495,850

Accounts Affected Debit (£) Credit (£)

Cost of sale 1,800,000
Inventories opening 1,800,000
Cost of sale 16,000,000
Purchases 16,000,000
Inventories closing 1,360,000
Cost of sale 1,360,000

Accounts Affected Debit (£) Credit (£)

Cost of building: 21,000,000 - 15,000,000 = 6,000,000
3% straight line basis per year of cost of building: 6,000,000 x 3% = 180,000
40% to distribution expense: 180,000 x 0,6 = 108,000
60% to administrative expense: 180,000 x 0,4 = 72,000
20% reducing balance basis: (8,000,000 - 1,600,000) x 0,2 = 1,280,000
Allocated to administrative expense 1,280,000
Equipment – accumulated depreciation 1,280,000
Depreciated per year: 1,300,000 : 5 (being depreciated over 5 years) = 260,000
Allocated to distribution expenxes 260,000
Motor vehicles - accumulated depreciation 260,000

Accounts Affected Debit (£) Credit (£)

Advertising costs: 1/10/2019 to 31/12/2019 and total cost of 7 months is 35,000
Distribution cost: (35,000 : 7) x 3 = 15,000
Distribution cost 15,000
Accrual (The cost of 7 months but was paid in advance 3
months)
15,000

Accounts Affected Debit (£) Credit (£)

Interest expense 300,000
Trade payable 300,000

Accounts Affected Debit (£) Credit (£)

Corporation tax 250,000
Tax payable 250,000

Accounts Affected Debit (£) Credit (£)

1 for 5 bonus issue and 10,000,000 share capital => Share premium: 2,000,000
Share capital 2,000,000
Share premium 2,000,000
Share capital(31/12/19) with 1 for 10 issue: 12,000,000 : 10 = 1,200,000
Share premium: 1,200,000 x (1,4-1) = 480,000
Cash: 1,200,000 + 480,000 = 1,680,000 1,680,000
Share capital 1,200,000
Share premium 480,000

Accounts Affected Debit (£) Credit (£)

Prepayment (1/12/19 to 31/12/19): (27,000:3)x1=9,000
Prepayment (1/12/19 to 29/2/2020): (27,000:3)x2=18,000
Prepayment 18,000
Administrative expenses 18,000
 Final trial balance
Debit (£) Credit (£)