2020 NAS 3E POA EOY P1 Q1

2020 NAS 3E POA EOY P1 Q1

1 Strawberry Shortcake provided the following information on her trading business as at 31 March 2020.

 

$

Capital, 1 April 2019

???

Cash at bank

11 240

Loan from Cherry Finance

20 000

Sales revenue

147 500

Sales returns

1 970

Cost of sales

82 600

Inventory

19 200

Equipment

34 800

Repairs and maintenance

375 

Salaries and wages

22 700

Trade payables

7 400

Trade receivables

12 135

Upon checking, it was discovered that the following transactions were not recorded:

1. Invoice received for purchase of display shelves costing $780.

2. Cheque payment of $4 350 to Huckleberry Pie in full settlement of a $4 500 debt.

3. Credit sales amounting to $1 840. The goods cost $1 230.

REQUIRED

a. Explain the difference between a trading business and a service business.

[1]

b. Give one reason why Strawberry Shortcake needs to prepare a trial balance.

[1]

c. Prepare Strawberry Shortcake’s adjusted trial balance on 31 March 2020, after taking into account the missing transactions and showing clearly the balance in the capital account. All calculations must be clearly shown adjacent to the affected items

[11]

[TOTAL 13]

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A trading business makes profits by buying and selling goods to customers while a service business makes profits by providing services to customers. 

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