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Level 2 Book-keeping & Accounts
Solutions Booklet

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Level 2 Book-keeping & Accounts
Solutions Booklet



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CONTENTS

1 Advanced Aspects of Depreciation

1

2 Adjusting for Accruals and Prepayments

5

3 Bad Debts and Provision for Doubtful Debts

9

4 Introduction to Partnership Accounts

12

5 Admission and Retirement of Partners

17

6 Dissolution of a Partnership



21

7 Formation of a Company – Meaning, Purpose and Effect

26

8 Limited Companies – The Profit and Loss Account

28

9 Limited Companies – The Balance Sheet

30

10 Control Accounts

39

11 Incomplete Records

42

12 Stock Valuation

49

13 Manufacturing Accounts

51

14 Non -Trading Organisations

55

15 Non -Trading Organisations: Subscriptions Account and Balance Sheet

58

16 Errors and Use of a Suspense Account

63

17 Calculation and Interpretation of Ratios

67

18 Preparing Simple Financial Statements Using Ratios

71



Chapter 1
Advanced Aspects of Depreciation
Answers to ‘Think about it’ Questions
Page 2 – Specific causes of depreciation:
 Wear and tear
 Depletion (of natural resources)
 Technical obsolescence
 Inadequacy
 Passage of time
Page 5 – Three types of assets and methods to match:
 Hand tools – revaluation method
 Motor vehicle – reducing balance method
 Machinery – machine hours
Page 6 – Effects of the different methods of depreciation:
 The reducing balance method had the highest depreciation charge resulting in the
lowest net book value at the end of the first year.
 The straight-line method has the lowest depreciation charge resulting in the highest
net book value at the end of the first year.

Solutions to Target Practice Questions
Question 1
(a)

Depreciation is an accounting adjustment, which measures the fall in value of a fixed
asset.

(b)

The charge for deprecation is posted to the debit side of the Depreciation Expense
Account and the credit side of the Provision for Depreciation Account.

Question 2

01/01/X5 Bank
01/01/X6 Balance b/d
01/01/X7

Balance b/d

31/12/X5 Balance c/d

31/12/X6 Balance c/d

Machinery Cost
£
120 000
31/12/X5
120 000
120 000
31/12/X6
120 000
120 000

Balance c/d
Balance c/d

Provision for Depreciation of Machinery
£
12 000 31/12/X5 Depreciation Expense
12 000
01/01/X6 Balance b/d
24 000 31/12/X6 Depreciation Expense
24 000
01/01/X7 Balance b/d

£
120 000
120 000
120 000
120 000

£
12 000
12 000
12 000
12 000
24 000
24 000

1


01/01/X5

Bank

01/01/X6

Balance b/d

01/01/X7

Balance b/d

31/12/X5 Balance c/d

31/12/X6 Balance c/d

Motor Vehicles Cost
£
28 000 31/12/X5
28 000
28 000 31/12/X6
28 000
28 000

Balance c/d

Provision for Depreciation of Motor Vehicles
£
7 000 31/12/X5 Depreciation Expense
7 000
01/01/X6 Balance b/d
12 250 31/12/X6 Depreciation Expense
12 250
01/01/X7 Balance b/d

£
7 000
7 000
7 000
5 250
12 250
12 250

Depreciation Expense
£
12 000
7 000
31/12/X5 Profit and Loss
19 000
12 000
5 250
31/12/X6 Profit and Loss
17 250

31/12/X5 PFD Machinery
31/12/X5 PFD Motor vehicles
31/12/X6
31/12/X6

£
28 000
28 000
28 000
28 000

Balance c/d

PFD Machinery
PFD Motor vehicles

£
19 000
19 000
17 250
17 250

Workings
Machinery
Purchase cost
Depreciation 31 December 20X5

£120 000 x 10%

Depreciation 31 December 20X6

£120 000 x 10%

Motor vehicles
£
120 000
12 000
108 000
12 000
96 000

£28 000 x 25%
£21 000 x 25%

£
28 000
7 000
21 000
5 250
15 750

N.B. PFD = Provision for Depreciation

Question 3
Machines:
Cost 01/01/X7
Depreciation charge:
(£35 000 x 12%) x 10/12
£42 000 x 12%
(£22 500 x 12%) x 4/12
£50 000 x 12%
NBV
Sales proceeds
Profit/(Loss)

A
£
35 000

B
£
42 000

C
£
22 500

D
£
50 000

3 500
5 040
900
31 500
28 600
(2 900)

36 960

21 600
15 360
(6 240)

6 000
44 000

2


01/01/X7

Bank

01/01/X8

Balance b/d

30/04/X7
31/10/X7

Disposals - C
Disposals - A

31/12/X7

Balance c/d

30/04/X7
31/10/X7
31/12/X7
31/12/X7

30/04/X7
31/10/X7

Machinery Cost
£
149 500 30/04/X7
31/10/X7
31/12/X7
149 500
92 000

£
22 500
35 000
92 000
149 500

Disposal Machine C
Disposal Machine A
Balance c/d

Provision for Depreciation of Machinery
£
900 30/04/X7 Depreciation expense - C
3 500 31/10/X7 Depreciation expense - A
31/12/X7 Depreciation expense - B
11 040 31/12/X7 Depreciation expense - D
15 440
01/01/X8 Balance b/d

PFD of Machinery - C
PFD of Machinery - A
PFD of Machinery - B
PFD of Machinery - D

Machine C Cost
Machine A Cost

Depreciation Expense
£
900
3 500
5 040
6 000
31/12/X7 Profit and Loss
15 440

Asset Disposal
£
22 500 30/04/X7
35 000 30/04/X7
30/04/X7
31/10/X7
31/10/X7
31/10/X7

£
900
3 500
5 040
6 000
15 440
11 040

£

15 440
15 440

£
PFD Machine C
Bank
Loss on Disposal
Machine C
PFD Machine A
Bank
Loss on Disposal
Machine C

57 500

900
15 360
6 240
3 500
28 600
2 900
57 500

Question 4

Depreciation for year ended 31
March 20X7

Truck 1
£
6 250

Truck 2
£
3 750

Truck 3
£
6 750

Truck 4
£
10 000

3


01/04/X6 Balance b/d

01/01/X7

30/09/X6
31/12/X6
31/03/X7

30/09/X6
31/12/X6
31/03/X7
31/03/X7

30/09/X6
30/09/X6
31/12/X6
31/12/X6

Balance b/d

Trucks Cost
£
131 000 30/09/X6
31/12/X6
31/12/X6
131 000
65 000

Disposal Truck 2
Disposal Truck 3
Balance c/d

Provision for Depreciation of Trucks
£
01/04/X6 Balance b/d
Disposals – Truck 2
11 250 30/09/X6 Depreciation – Truck 2
Disposals – Truck 3
15 500 31/12/X6 Depreciation – Truck 3
31/03/X7 Depreciation – Truck 1
Balance c/d
33 750 31/03/X7 Depreciation – Truck 4
60 500
01/04/X7 Balance b/d

PFD –- Truck 2
PFD –- Truck 3
PFD –- Truck 1
PFD –- Truck 4

Truck 2 Cost
Profit on disposal – Truck 2
Truck 3 Cost
Profit on disposal – Truck 3

Depreciation Expense
£
3 750
6 750
6 250
10 000 31/03/X7
26 750

Asset Disposal
£
30 000 30/09/X6
8 750 30/09/X6
36 000 31/12/X6
2 300 31/12/X6
77 050

£
30 000
36 000
65 000
131 000

£
33 750
3 750
6 750
6 250
10 000
60 500
33 750

£

Profit and Loss

PFD Truck 2
Bank
PFD Truck 3
Bank

26 750
26 750

£
11 250
27 500
15 500
22 800
77 050

Question 5
Asset Disposal
£

£

01/07/X6

Machine 1 Cost

30 000

01/07/X6

01/10/X6
31/10/X6

Machine 2 Cost
Profit on Disposal –
Machine 2

30 000

01/07/X6
01/07/X6

Machine 1 Provision for
Depreciation
Cost of truck (trade-in)
Loss on disposal

10 500
18 000
1 500

5 500
31/10/X6
31/10/X6
65 500

Machine 2 Provision for
Depreciation
Machine 2 Cost
(exchange)

10 500
25 000
65 500

4


Chapter 2
Adjusting for Accruals and Prepayments
Answers to ‘Think about it’ Questions
Page 16 – Why is an expense prepayment an asset on the balance sheet?


As the expense is paid for before it is used, the supplier owes the business the
amount until such time when the expense prepayment is used up. Since the
expense supplier owes the business, he is similar to a debtor, which is a current
asset.

Page 17 – Why is an expense accrual a liability on the on the balance sheet?


As the expense as been used up but unpaid at the end of the period the business
owes the supplier; the supplier is similar to a creditor, therefore a current liability on
the balance sheet.

Solutions to Target Practice Questions
Question 1
(a) A prepayment for Heat and Light of £330.

Dr

Prepayments

Cr

Heat and Light

£
330

£

330

(b) Accrued Motor Expenses of £927.

Dr

Motor expenses

Cr

Accruals

£
927

£

927

(c) Sales of £2500 invoiced in advance.

Dr

Sales

Cr

Accruals and deferred income

£
2 500

£

2 500

(d) Rent receivable but not yet collected of £700.
Dr
Cr

Prepayments and accrued income
Rent receivable

£
700

£
700

5


Question 2
(a) Telephone accrual: 1/3 x £900 = £300
(b) Insurance prepayment: 7/12 x £420 = £245
(c) Electricity accrual: 2/3 x £840 = £560
(d) Rent prepayment: 1/2 x £8000 = £4000

Question 3

30/06/X1

01/02/X1

30/06/X1

Accrual

Bank

Accrual

Telephone
£
300 30/06/X1
300

Motor Insurance
£
420 30/06/X1
30/06/X1
420

Electricity
£
560 30/06/X1
560

Profit and Loss Account

£
300
300

Prepayment
Profit and Loss Account

£
245
175
420

Profit and Loss Account

£
560
560

Prepayment
Profit and Loss Account

£
4 000
4 000
8 000

Rent
01/04/X1

Bank

£
8 000

30/06/X1
30/06/X1

8 000

30/06/X1

Balance c/d

30/06/X1
30/06/X1

Motor insurance
Rent

01/07/X1

Balance b/d

Accruals
£
30/06/X1
860 30/06/X1
860
01/07/X1

Prepayments
£
245
4 000 30/06/X1
4 245
4 245

Telephone
Electricity
Balance b/d

£
300
560
860
860

£
Balance c/d

4 245
4 245

6


Question 4

01/10/X6
01/10/X6
01/04/X7
30/09/X7
30/09/X7
30/09/X7
30/09/X7
30/09/X7
01/10/X7
01/10/X7

Rent, Rates, Electricity and Gas
£
Balance b/d - Rent
780 01/10/X6 Balance b/d - Electricity
Balance b/d - Rates
1 500 01/10/X6 Balance b/d - Gas
Bank - Rates
1 700
Bank - Rent (12 x £800)
9 600
Bank - Electricity
3 000 30/09/X7 Profit and Loss Account
Bank - Gas
1 900
Balance c/d - Electricity
245 30/09/X7 Balance c/d – Rent
Balance c/d - Rent
108 30/09/X7 Balance c/d – Rates
18 833
Balance b/d – Rent
800 01/10/X7 Balance b/d - Electricity
Balance b/d – Rates
850 01/10/X7 Balance b/d - Rent

£
275
130

16 778
800
850
18 833
245
108

Workings:
Rent prepayment: 1 x £800 = £800
Rates prepayment: 6/12 x £1700 = £850
Electricity accrual: £245
Gas accrual: 1/3 x £324 = £108

Question 5
Birch
Trading, Profit and Loss Account for the year ended
31 December 20X3
£
Sales
Cost of Sales
Opening stock
Purchases (£50 925 + £665)
Less: Closing stock

4 025
51 590
55 615
3 765
51 850
61 900

Gross profit
Less: Expenses
Wages
Rent, rates and insurance (£6125 + £350 - £1312)
Heat and light (£5525 – £210)
Motor expenses (£3489 + £300 - £442)
Telephone and stationery (£1672 + £136 - £95)
Depreciation
Net profit

£
113 750

23 500
5 163
5 315
3 347
1 713
3 938
42 976
18 924

7


Birch
Balance Sheet at 31 December 20X3
£
Fixed assets
Motor vehicles: cost
Less: Accumulated depreciation
Current assets
Stock
Debtors
Prepayments (£442 + £1312 + £210 + £95)
Bank

Current liabilities
Creditors
Accruals (£300 + £350 + £665 + £136)
Net Current Assets
Capital account
Opening Capital
Add: Net profit
Less: Drawings

£
15 750
5 907
9 843

3 765
3 553
2 059
195
9 572

3 290
1 451
4 741
4 831
14 674
13 250
18 924
32 174
17 500
14 674

8


Chapter 3
Bad Debts and Provision for Doubtful Debts
Answers to ‘Think about it’ Questions
Page 28 – Why would a business decide to increase or decrease its provision for
doubtful debts?


If the business financial records over a period of time show a trend in an increasing
number of bad debts, or if the economy is not doing well, then it is likely that the
business would increase the provision to ensure that profits and current assets are
not overstated. If trends shows that the level of bad debts is decreasing then the
business may decrease the provision.

Solutions to Target Practice Questions
Question 1
Dr
Cr

Provision for Doubtful Debts
Profit and Loss Account

Question 2
An increase in the provision for doubtful debts will decrease the net profit for the year and a
decrease in the provision for doubtful debts will increase the net profit for the year.

Question 3
Bad debt provision: (£55 400 - £2650) x 4% = 2110

Balance Sheet Extract at 31 December 20X4
Current Assets

Debtors (£55 400 - £2650)
Less: Provision for Doubtful Debts

£
52 750
2 110
50 640

9


Question 4
Year ended 30 September:

20X5
£
34 150
(500)
33 650
(850)
32 800
1%
328
850
1 178

Debtors
Bad debts written off
Revised debtors
Less: specific provision
Balance of debtors
General provision
Add: specific provision
Total provision

Increase in provision

£1 017

20X6
£
39 275
(1 800)
37 475
(1 475)
36 000
2%
720
1 475
2 195

20X7
£
44 498
(1 926)
42 572
(1 772)
40 800
3%
1 224
1 772
2 996
£801

Question 5

30/09/X5
30/09/X5

Bad debts written off
Provision for doubtful debts

30/09/X6
30/09/X6

Bad debts written off
Provision for doubtful debts

30/09/X7
30/09/X7

Bad debts written off
Provision for doubtful debts

30/09/X6

Profit and Loss Account

30/09/X7

Profit and Loss Account

30/09/X5

Balance c/d

30/09/X6

Balance c/d

30/09/X7

Balance c/d

Bad Debts
£
500
1 178 30/09/X5
1 678
1 800
1 017 30/09/X6
2 817
1 926
801 30/09/X7
2 727

Bad Debts Recovered
£
245 30/09/X6
245
423 30/09/X7
423

£
Profit and Loss Account

1 678
1 678

Profit and Loss Account

2 817
2 817

Profit and Loss Account

2 727
2 727

Bank
Bank

Provision for Doubtful Debts
£
1 178 30/09/X5 Bad debts
1 178
01/10/X5 Balance b/d
2 195 30/09/X6 Bad debts
2 195
01/10/X6 Balance b/d
2 996 30/09/X7 Bad debts
2 996
01/10/X7 Balance b/d

£
245
245
423
423

£
1 178
1 178
1 178
1 017
2 195
2 195
801
2 996
2 996

10


Alice Jones - Profit and Loss Account Extract for the year ended 30 September 20X7
£
Gross Profit
Add: Bad debts recovered
Expenses
Increase in provision for doubtful debts
Bad debts

423
£
801
1 926

Alice Jones – Balance Sheet Extract at 30 September 20X7
Current Assets
Debtors
Less: Provision for doubtful debts

£
42 572
2 996
39 576

11


Chapter 4
Introduction to Partnership Accounts
Answers to ‘Think about it’ Questions
Page 33 – What are some of the benefits of a partnership in comparison to a
sole trader?





More capital available to invest in the business; greater opportunity to expand the
business
Sharing of work load
Access to a wider range of skills and knowledge which contributes to the success of
the business
Each partner won’t have bear the loss on their own; losses are shared among
partners

Page 38 – What do these partner balances on their current account tells you?


Both George and Fred have credit balances on their current accounts; this means
that the business owes them money. If the balances were debit then this would
mean that the partners’ owe the business/partnership.

Solutions to Target Practice questions
Question 1
Term

Definition

Partnership

A partnership is formed when two or more people set up in
business together.

Partnership agreement

A written document that sets out the terms of trade with each
partner.

Capital Account

Capital is the amount invested by a partner in the business
and this is held in the capital account.

Current Account

This is the account that records the balance owed to or from
the partnership by the partners. The balance on this account
will fluctuate as profits are earned and drawings are taken.

Interest on capital

This is an annual amount awarded to the partners based on
a percentage of the capital they have invested. It represents
a return on their investment.

Drawings

These are the amounts withdrawn from the partnership by
the partners.

Interest on drawings

This is interest charged at an agreed percentage to take
account of the timing of drawings and to discourage partners
from drawing from the business.

Salary

This is a specified amount due to a partner before the profits
are shared.

Profit share ratio

The share or split of the remaining profits or losses between
the partners. This could be expressed as a percentage or as
a ratio e.g. 2:1
12


Question 2
Debit
Share of profit

Appropriation Account

Share of loss
Salary

Partners’ Current
account
Appropriation Account

Interest on capital

Appropriation Account

Interest on drawings

Partners’ Current
Account
Profit and Loss Account

Interest on loan from partner

Credit
Partners’ Current
Account
Appropriation Account
Partners’ Current
Account
Partners’ Current
Account
Appropriation Account
Partners’ Current
Account or Bank
account

Question 3
Using the accounting equation (Assets = Capital + Liabilities), the capital introduced by each
partner can be calculated:

Plant and equipment
Motor vehicles
Stock
Debtors
Bank
Creditors

Exe
£
28 000
18 700
2 500
8 208
1 115
(5 850)
52 673

Why
£
37 500
1 750
6 023
864
(3 600)
42 537

Zed
£
15 000
10 900
3 250
1 615
1 234
(885)
31 114

Total
£
80 500
29 600
7 500
15 846
3 213
(10 335)
126 324

13


Exe, Why and Zed
Balance Sheet at 1 July 20X6
£
Fixed assets
Plant and equipment
Motor vehicles

80 500
29 600
110 100

Current assets
Stock
Debtors
Bank

7 500
15 846
3 213
26 559

Current liabilities
Creditors
Net Current Assets
Represented by:
Capital Accounts

£

(10 335)
16 224
126 324
Exe
Why
Zed

52 673
42 537
31 114
126 324

Note:
As the assets and liabilities contributed by each partner now become the partnership assets and
liabilities, they are shown as a total figure on the partnership balance sheet .

Question 4
The profit needs to be adjusted to account for the loan interest of
5% x £20 000 = £1000.
The revised profit for appropriation is £39 661 - £1000 = £38 661.

Jake and Misty
Appropriation Account
for the year ended 31 December 20X2
£
Revised profit
Add: Interest on drawings

Jake (£16 620 x 5%)
Misty (£23 760 x 5%)

£
38 661

831
1 188
2 019
40 680

Less: Interest on capital

Jake (£26 000 x 8%)
George (£19 500 x 8%)

2 080
1 560
(3 640)

Less: Salary

Misty

Profit share

Jake (75%)
Misty (25%)

(7 800)
29 240
21 930
7 310
29 240

14


01/01/X2
31/12/X2
31/12/X2

Balance b/d
Interest on drawings
Drawings

31/12/X2

Balance c/d

01/01/X3

Balance b/d

Partners’ Current Accounts
Jake
Misty
£
£
4 420 01/01/X2 Balance b/d
831
1 188 31/12/X2 Interest on capital
16 620
23 760 31/12/X2 Salary
31/12/X2 Profit share
8 899
31/12/X2 Balance c/d
26 350
29 368
12 698 01/01/X3 Balance b/d

Jake
£
2 340
2 080
21 930
26 350
8 899

Misty
£
1 560
7 800
7 310
12 698
29 368
-

Question 5
Tiger and Snake
Trading, Profit and Loss Account for the year ended
31 December 20X8
£
Sales
Cost of Sales
Opening stock
Purchases

£
120 000

2 750
45 000
47 750
3 000

Less: Closing stock

44 750
75 250

Gross profit
Less: Expenses
Wages (£24 000 + £800)
Insurance (£2800 - £400)
Depreciation: equipment (£40 000 x 10%)
Depreciation: motor vehicles ((£18 500 - £3700) x 25%)
Bad debts ((£33 400 x 5%) - £1002)

24 800
2 400
4 000
3 700
668
35 568
39 682

Net profit

Tiger and Snake
Appropriation Account
for the year ended 31 December 20X8
£
Net profit
Add: Interest on drawings

Tiger (£2000 x 5%)
Snake (£4000 x 5%)

£
39 682
100
200
300
39 982

Less: Interest on capital

Tiger (£40 000 x 7%)
Snake (£20 000 x 7%)

2 800
1 400
(4 200)

Less: Salary

Snake

Profit share

Tiger (2/3)
Snake (1/3)

(4 000)
31 782
21 188
10 594
31 782

15


31/12/X8
31/12/X8

Interest on drawings
Drawings

31/12/X8

Balance c/d

Partners’ Current Accounts
Tiger
Snake
£
£
100
200 01/01/X8 Balance b/d
2 000
4 000 31/12/X8 Interest on capital
31/12/X8 Salary
33 188
20 882 31/12/X8 Profit share
35 288
25 082
01/01/X9 Balance b/d

Tiger
£
11 300
2 800
21 188
35 288
33 188

Snake
£
9 088
1 400
4 000
10 594
25 082
20 882

Tiger and Snake
Balance Sheet at 31 December 20X8
£
Fixed assets
Buildings at cost
Plant and equipment (NBV) (£40 000 - £4000 - £4000)
Motor vehicles (NBV) (£18 500 - £3700 - £3700)
Current assets
Stock
Debtors (£33 400 - £1670)
Prepayments

Current liabilities
Bank overdraft
Creditors
Accruals

65 000
32 000
11 100
108 100
3 000
31 730
400
35 130

6 400
21 960
800
29 160

Net Current Assets
Represented by:
Capital Accounts

£

5 970
114 070
Tiger
Snake

40 000
20 000

Tiger
Snake

33 188
20 882

60 000
Current Accounts

54 070
114 070

16


Chapter 5
Admission and Retirement of Partners
Answers to ‘Think about it’ Questions
Page 44 – What are some of the specific reasons why someone would be willing to pay
for goodwill?

-

Goodwill in a business may be based on the industry-specific knowledge,
know-how and good reputation for customer service that the business has.
Additionally, if it is in a good location for business then this could add to
goodwill.

Solutions to Target Practice Questions
Question 1
£
Consideration (amount paid)
Assets and liabilities acquired:
Fixtures and fittings
Stock
Debtors
Creditors
Goodwill

£
45 000

22 400
3 700
16 750
(2 895)
39 955
5 045

Question 2
The goodwill introduced by the new partner needs to be shared between the existing partners.
The share that each of the existing partners receives is based on the difference between their old
profit share and the new profit share now that a new partner has been admitted. The double entry
will be to debit the bank with the £25 000 and credit the capital accounts of the existing partners
with the appropriate share of the goodwill.

Question 3
Bank
Helen Capital Account

Dr
£
18 000

CR
£
18 000

Being the payment of Helen’s capital contribution into the partnership bank
account
Goodwill
Dan Capital Account (1/2 x £30 000)
Collette Capital Account (1/2 x £30 000)

30 000
15 000
15 000

Being the creation of goodwill written into the partners’ capital accounts in the
old profit sharing ratio
Dan Capital Account (3/6 x £30 000)
Collette Capital Account (2/6 x £30 000)
Helen Capital Account (1/6 x £30 000)
Goodwill

15 000
10 000
5 000
30 000

Being the goodwill written out of the partners’ capital accounts in the new profit
sharing ratio
17


01/01/X7

Goodwill

01/01/X7

Balance c/d

Dan
£
15 000
35 000
50 000

Partners’ Capital Accounts
Collette
Helen
£
£
10 000
5 000 01/01/X7 Balance b/d
01/01/X7 Bank
40 000
13 000 01/01/X7 Goodwill
50 000
18 000
01/01/X7 Balance b/d

Dan
£
35 000

Collette
£
35 000

Helen
£

15 000
50 000
35 000

15 000
50 000
40 000

18 000
18 000
13 000

Question 4

31/12/X2
31/12/X2
31/12/X2
31/12/X2

Revaluation Account – Knot and Berry
£
7 000 31/12/X2 Goodwill

Plant and machinery
(£99 000 - £92 000)
Debtors
Capital account : Knot (2/3)
Capital account : Berry (1/3)

31/12/X2
31/12/X2

Balance b/d
Capital account: Rasp

01/01/X3

Balance b/d

31/12/X2
31/12/X2

Revaluation
Capital accounts: Rasp

Knot
£
31/12/X2
31/12/X2
31/12/X2

Goodwill
Bank
Loan

31/12/X2

Balance c/d

28 705
86 115

114 820

£
34 500

458
18 028
9 014
34 500

Bank Account
£
12 120 31/12/X2
25 000 31/12/X2
37 120
8 415

Goodwill
£
34 500 31/12/X2
2 000 31/12/X2
36 500

34 500

Knot
Balance c/d

£
28 705
8 415
37 120

Capital account: Berry (3/4)
Capital account: Rasp (1/4)

£
27 375
9 125
36 500

Partners’ Capital Accounts
Berry
Rasp
£
£
27 375
9 125 31/12/X2
Balance b/d
31/12/X2
Revaluation
31/12/X2
Goodwill
31/12/X2
Plant and
machinery
31/12/X2
Cash
55 639
32 875 31/12/X2
Current account
83 014
42 000
01/01/X3
Balance b/d

Knot
£
90 000
18 028

Berry
£
74 000
9 014

Rasp
£

2 000
15 000
25 000
6 792
114 820

83 014
55 639

42 000
32 875

18


Berry and Rasp
Balance Sheet at 1 January 20X3
£
Fixed assets
Plant and machinery (£92 000 + £15 000)
Motor vehicles
Current assets
Stock
Debtors (£22 950 - £458)
Bank

Current liabilities
Creditors
Net Current Assets

107 000
32 700
139 700
19 125
22 492
8 415
50 032

(11 100)
38 932
178 632

Long term liabilities
Loan from Knot
Represented by:
Capital Account

Current account

£

86 115
92 517
Berry
Rasp

55 639
32 875

Berry

88 514
4 003
92 517

Question 5

01/07/X1
01/07/X1
01/07/X1
01/07/X1
01/07/X1
01/07/X1

Revaluation Account – Freeman and Hardy
£
Fixtures and Fittings
2 500 01/07/X1 Land and Buildings
(£37 500 - £35 000)
(£105 000 - £93 750)
Capital Account: Freeman (3/5)
22 875 01/07/X1 Stock
(£29 500 - £28 125)
Capital Account: Hardy (2/5)
15 250 01/07/X1 Goodwill
40 625
Land and Buildings
11 250 01/07/X1 Fixtures and fittings
Stock
1 375 01/07/X1 Capital Account: Freeman (2/5)
Goodwill
28 000 01/07/X1 Capital Account: Hardy (2/5)
01/07/X1 Capital Account: Willis (1/5)
40 625

01/07/X1

Revaluation

01/07/X1

Balance c/d

Freeman
£
15 250
82 625
97 875

Partners’ Capital Accounts
Hardy
Willis
£
£
15 250
7 625 01/07/X1 Balance b/d
01/07/X1 Revaluation
50 000
25 375 01/07/X1 Bank
65 250
33 000
01/07/X1 Balance b/d

Freeman
£
75 000
22 875
97 875
82 625

Hardy
£
50 000
15 250
65 250
50 000

£
11 250
1 375
28 000
40 625
2 500
15 250
15 250
7 625
40 625

Willis
£

33 000
33 000
25 375

19


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