2020 PHS 3E POA EOY P2 Q3

2020 PHS 3E POA EOY P2 Q3

3 Accountants must put in place checks in the accounting system. One of the tools used is trial balance.

Additional information

1. The owner took out an office computer costing $2 100 for his son. This has not been recorded yet.

2. The net realisable value of the inventory was $47 930.

3. Interest expense of $200 was unpaid.

REQUIRED

a. What is a trial balance?

[1]

b. Explain two purposes of preparing a trial balance.

[2]

Wee’s accountant prepared the following trial balance on 20 May 2020 before he went on leave.

Trial Balance as at 20 May 2020

 

DR $

CR $

Motor vehicles

64 000

 

Office equipment

33 000

 

Inventory

18 330

 

Sales revenue

 

124 500

Sales returns

1 840

 

Cost of sales

70 200

 

Rent and rates

14 300

 

Insurance

2 500

 

Salaries and wages

25 600

 

Commission income

 

3 500

Trade payables

 

14 500

Trade receivables

20 750

 

Cash at bank

 

600

Cash in hand

180

 

Loan from bank

 

40 000

Capital

 

72 900

Drawings

5 300

 
 

256 000

256 000

The following summarised the events which took place between 21 and 31 May 2020 (inclusive):

1.  Goods costing $5 300 were sold on credit for $9 300.

2. The business bought new inventory costing $5 000. $1 200 was paid by cheque; the rest on credit.

3. Trade debtors who owed $12 750 settled their debts by cheques. Total discounts of $150 were given for prompt payment.

4. Owner withdrew $50 cash for own use.

5. The following expenses were paid for by cheque:

(i)

salaries and wages

$4 200

(ii)

insurance

$200

(iii)

repairs to office equipment

$180

REQUIRED

c. Update the trial balance to 31 May 2020.

[10]

[TOTAL 13]

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Trial balance is a listing of ledger balances on a particular date.

b) Purposes of trial balance:
1. To check on the arithmetic accuracy and completeness of double
entries made in the ledger.
2. To facilitate the preparation of financial statements.

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