FRA UNit 5 short test 3 Arthur Manderson

nodgers1nodgers1 Feels At HomePosts: 31Registered
Hi has anyone done this assignment? im just about to start it and i really dont know where to start

these are the details i have

arthur is a sole trader of an electrical spares shop, he keeps minimal records. I have to prepare accounts for year ending 31 March 2004. All receipts have been banked with the exception of £11,000 which has been retained for his own use

Assets and liabilities at 31 march 2004/2005 were

2004 2005

Bank balance 1,500 2,000
Debtors 9,100 9,900
Rent paid in advance 100 200
Stock 4,400 5,300
Expense unpaid Wages 350 440
Heating 135 145
Creditors 5215 6,205
Vehicle 9,000 9,000
Provision for depreciation 900
Capital 17,500

a) Vehicle is to be depreciated using straight line method of 10% per annum, new fitings purchased during the year are also to be depreciated at 10% per annum.

b) Artur took £100 worth of goods from stock for his personal use

c) Payments made during the year included:

Paid to suppliers of electrical goods 3400
Rent/rates 3,000
Light/heating 805
Motor expenses 1,150
New fitiings 750
Wages 2000
Bank charges 105

i have to prepare a bank account, profit and loss and statement of affairis at 31 march 2005

i think i will know how to do the p&l and balance sheet, but i really dont know where to start with drawing up the bank account

any help?

thank you
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Comments

  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Try drawing up some T accounts and put all the information in there. To avoid getting yourself confused, start with filling in the opening balances (especially for the bank) and just work your way down, ticking everything you used. Make sure you do the double entry for everything before ticking it off.

    If you got them all ticked off, you can close the T accounts and transfer them to the trial balance. If it balances you should be able to draw the profit and loss account and balance sheet. If it doesn't balance, go back and try to work out if you missed out a double entry or closing balance and if you still can't find it, put it in a suspense account, but I think it should balance.

    It's a lot of work, but it pays off in the end.

    As you do it more often, it will become easier and faster and you will notice it will really help in the long run.
  • steveJsteveJ Experienced Mentor Posts: 694Registered
    Ill second that. Use T- accounts and work it from there. Sometimes i find it better to start off from the beginning i.e T-accounts up to the final accounts.
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    Hi I understand what you are both saying, but i know this probably sounds silly, but im getting confused in the fact that i have 2 years to work with. am i correct in assuming that i should start with an opening balance of £1500 for bank for 2004 and then the balance ar the end should be £2000 for £2005? also i know this is a question about incomplete records so i will have to work out the figures for sale and purchases. is that correct?

    also it states that £100 worth of goods was taken from stock for his personal use, and that all recipets have been banked with the exception of £11,000 which have been retained for his own use, so will this be classified as drawings? totalling £11,100 (11000+100)?

    thank you
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Sounds about right, but with incomplete records, it still pays to draw up the T accounts, so you can find out what information is missing and what to fill in the gaps.

    The fact you have two years, just means 1 year is the opening balance and the other one the closing balance. It is unlikely this means there are two years worth of accounts here.

    For example, the bank balance is one year 1,500 and the next year this is 2,000. That means the opening balance is one and the closing balance is the other. You got to somehow see to match up all receipts and payments so that in the end it balances.

    You got the drawings of 11,100 correct, based on the information, however, before writing that up as a final amount, make sure there are no other hidden drawings.

    Thanks,
    Rinske
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    Hi

    thanks for yr reply,\as far as i know those are the only drawings, £100 from stock and £11000 worth of receipts which had not been banked.

    so you were saying that this is not an example of 2 years worth of accounts and my closing balance should be equal to £2000 which is the bank balance for 2005?

    so as i have been given 2 totals, 1 set of figures for each year, i am just to total both sets of figures, for example, in 2004, debtors was £9100 and in 2005 £9900, so the total debtors would be £19000?

    and stock is £4400 in 2004 and £5300 in 2005, so total stock would be £9700? am i to deduct £100 which was taken from stock as drawings?

    thank you
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Hi,

    I don't think you should add both up. One set will be used as the opening statement of the year and the other set will be used as the closing balance of the year. You will need this in order to find the missing figures.

    The dates of the accounts are the 31st of March 2004 and 31st of March 2005. This is exactly a year and the question wants you to find out what happened between those dates and based on that make a profit and loss account and balance sheet. The 31st of March 2004 will represent the known opening balances and the data on the 31st of March 2005 should represent the closing balances where needed.

    If you look at the T accounts, there are often opening balances from the year before and closing balances after the year end.

    The given figures will be just enough, so you can find all the missing figures for in between.

    What you need to do is fill in everything in T accounts, so you can find what figures are missing and then use the given figures to calculate them. Which sounds very easy, but it will get easier if you do it a lot, so just give it a go and see where you get to, I'm sure you wil surprise yourself! Or at least drawing up the T accounts would still be my suggestion.

    After you found out the missing figures, you should be able to draw up the Profit and Loss account and Balance sheet based on the trial balance of these figures.

    As for the stock, I would not adjust the given stock figures, as these are usually the counts at year end (31st of March), if you draw up the T accounts, this will possible show up as part of the creditors.

    I hope that helps!

    Thanks,

    Rinske
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    sorry to complain again, but i just cant grasp it and im probably missing sth so simple, i need to work out the sales and purchases too from the figures given and this will no doubt be included in the final bank account, ive tried doing T-Accounts and its still not balancing and im unsure of how to work out creditors and debtors for 31march 2005, i know im missing sth easy here for it to click

    i dont know how, but i managed to work out purchases to be 34,890 (34,000-5215) + 6205

    any help pls, as im really struggling and i dont know how to move fwd

    thank you
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    It doesn't sound like complaining to me, more like a question....

    Have you filled in all amounts from the exercise, all data in a T account in double entry?

    As for the purchases, you seem to be on the right track, although I think you might be missing the 100 of the drawings in this calculation. I haven't checked the amounts, it's just that the difference is slightly different from the creditors amounts.

    As purchases are most likely paid for on credit this would be part of the creditors and you should be able to fill in all of the details of creditors (Purchase ledger control account) now.

    Debtors will be the sales part and it might be that you have to start filling in the profit and loss account and the balance sheet to see if you can work out the sales from there (The sales ledger control account is the same as the debtors in these cases).

    Try to use the standard format of a profit and loss account and a balance sheet and write in what you have and leave the items blank which you don't have.

    Based on this information, and combining all figures, you should be able to find all figures in the end.

    Cheers,
    Rinske
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    thanks

    i wll give it a try tomorrow hopefully and see if i get anywhere
  • steveJsteveJ Experienced Mentor Posts: 694Registered
    I had trouble with this aswell...I struggled with incomplete records for a good couple of months and it is a cliche but it did finally 'click' !

    For finding out purchases and sales i used control accounts....entering opening debtors and creditors, closing debtors and creditors, reciepts or payments through the year and then the balancing figure would be purchases or sales.

    Does that make sense ?
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    Hi Steve,

    i am able to calculate purchases, thats no problem, as i have the opening and closing creditor figures and i have the total payments figures which is £34000 paid to suppliers of electrical goods, but im having trouble with the sales figure, as first of all im totally stuck with the bank account, and i dont know where to get the figures for total receipts.

    ive tried doing t-accounts so many times, but im still getting lost on the figures i have to use on both credit and debit side,

    so far on Dr side of bank account, i have opening balance of £1500, and capital of £17,500, i know there should be another entry on the DR side as well as the missing sales figure

    on Cr side, i have Stock, expenses unpaid, vehicle, provision for depreciation, payment to suppliers, rent, light, motor expenses, new fittings, wages, bank charges and drawings,

    i just cant seem to get this correct as ive been told bank is supposed to have a balance of £42,310 and sales are supposed to be £54,100

    any help pls as its driving me crazy

    thanks
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Uhm, a quick note. Depreciation, unpaid expenses and stock should not be on the bank account. Stock comes from the purchases, which you probably already filled in.

    Depreciation is an expense, but gets journalled from depreciation to provision for depreciation and no cash actually leaves the bank for this and the unpaid expenses are not paid yet, so are not included in the banking figure.

    For the bank balance you have been given a closing figure, so that should be on the credit side as well (as it is not an overdraft).

    Does this help?

    Cheers,
    Rinske
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Looking back at your first post, the capital, is that a value at the 2004 or 2005 balance?

    If it is at the 2004 balance, it means it was in the business before this year and should not be in the bank account of this year either.

    It would just be listed as capital opening balance.

    I'm sorry, am I making any sense here or am I just confusing you more?
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    Hi Rinske, thanks so much for yr help,

    its slowly starting to sink in and i think im making slow progress now

    with regards to capital, it is only given £17,500 for 2004, no figure f03 2005, so are u saying this not be included in the bank account?

    i have managed to work out purchases to be £34,990 (34,000 - payments to creditors - 5215 - creditors at beginning of year) plus 6205 - creditors at end of year,

    is that right?

    still having difficulty calculating sales, but i know i should beable to calculate that figure once i can get my bank account done

    so far on CR side i have

    CR Purchases £34,990
    CR Rent £2900 ( am i right in assuming that i had to deduct the rent already paid in advance from this figure?)
    CR Light/heating £805
    CR Motor expenses £1,150
    CR New fitiings £750
    CR Wages £2000
    CR Bank charges £105
    CR Drawings £11,100 (11000 not banked and retained for own use and 100 taken from stock)

    was not really sure about the figure for vehicle as in 2004 it has an opening balance of £9000 and in 2005 has a closing balance of £9000?

    thank you
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Hi Nodgers,

    Incomplete records is not an easy thing which you just look at and say, oh that's how it's done. It's a nice puzzle and it will get easier once you get the hang of it! So the fact it's slowly sinking in is very positive!

    If the only capital is given 17,500 for 2004, then it should not be in the bank account, as it was already paid into the bank before the financial year started.

    The 100 you list in drawings from the bank, should not be deducted from the bank, but from purchases, as this is taken by him in goods and not in money.

    As for the rent, light and heating expenses. For the bank account the already paid part does not get deducted, but left out. So in the bank it will show as the given amount.

    This will be in the expenses account as a prepayment, but because you don't physically pay anything this year, you don't deduct that bit from the bank account. You do deduct the current payments, as 3000 and heating of 805.

    As for the rent account you would have an opening balance of 100. Debit, then a Bank payment (debit) of 3,000 and on the credit side the rent incurred and the part that has been prepaid for next year as prepayment of 200.
    The missing amount there is the 2900, which would be the rent incurred for this year (on the profit and loss account expenses).

    You got the motor vehicles correct, pay careful attention as the fitting is also given as a new fixed asset, even though the costs are "only" 750. This should be in the bank as you have it listed and in the fixture and fitting account as 750. (this would be a new account for a fixed asset).

    I must admit I can't say if the purchases are correct, as I have not calculated it myself. I might give it a go later, but haven't got time at the moment.

    I really hope this helps and I am not just confusing you even more!

    Thanks,
    Rinske
  • crispycrispy Trusted Regular SouthamptonPosts: 454Registered
    Hello,

    I was bored and thought would have a go.

    I have (hopefully) attached a file to this message. Where there is a * marked in the account this shows a balancing figure, the gross profit looks a little high and may not be correct - however I think the technique is sound.

    Start from Bank Account - then use to complete the debtors/creditors control accounts to work out Purchases/Sales etc. Hope this of some help and that you can follow it through.
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    Hi again

    no yr not confusing me, yr helping a lot actually. u said i was right about the motor vehicles, but i dont think i have included it in my bank account yet? as i got a bit confused as it states opening balance is £9000 and closing balance is £9000. so is £9000 the figure i use in the bank account?
  • crispycrispy Trusted Regular SouthamptonPosts: 454Registered
    Hi,

    Please check my message above :)
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    As he did not purchase or sell any motor vehicles, it wont be showing in the bank account. Have a look at Crispy's work and see if you understand his/her (sorry not sure) workings!

    It sounds a bit to me, like you are trying to put everything in the bank account, that is not needed, as only current year transactions will be in there. I might be wrong though, so no offense meant if not!

    Thanks Crispy for doing all the work, so I can just refer to your results :)
  • nodgers1nodgers1 Feels At Home Posts: 31Registered
    Hi Crispy,

    thanks so much for yr help and yrs too rinske, yr answer makes everything so clear now, the only mistake i noticed was that you had £3400 for suppliers figure, it should be £3400, but i have manged to adjust it and get everything to balance and worked out sales and purchases figures

    so thanks so much!

    there is just one thing that i didnt understand, in yr wages and heating account, you wrote accrual REVERSAL? what does the reversal mean, as i have not come accross that term in my books?

    and thanks again, yr a lifesaver
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    At the year end, they made an adjustment for prepayments for light and heating and the wages. At the new year you reverse that accrual back into the wages/ light and heating account, so that it is taken in the cost of the new year.

    As at year end you move some out again, it is often called reversal, as to make clear this was the balance from last year.

    I think that is the correct explanation, but I might be wrong on the reason though :)
  • steveJsteveJ Experienced Mentor Posts: 694Registered
    Ive only just passed this unit 5 FRA and this takes me back !!!

    I was struggling for ages with incomplete records and never thought id get through it . PERSISTANCE is the word here !

    You will gradually start understanding the different bits in your own way and i actually started to enjoy trying to find the different figures....

    Nice one and keep up the good work
  • amyjayne27amyjayne27 Trusted Regular Posts: 314Registered
    Hi,

    I am really really struggling with this question and I know someone has posted the answers but I am really trying to do it on my own.

    Even when I look at the answers I dont understand, like how do you get the supplies figure on the credit side of the bank account?

    I really dont think I am ever going to understand incomplete records, I am stressing out big time! I have written all the accounts out as t account but still i dont really know what to do!

    Any advice would be great, thanks

    Amy
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Hi,

    Sorry it's been a while since I looked at this one, but could I advise a few steps:

    Start with writing out all the T accounts like you did already.

    Draw up a simple profit and loss account and balance sheet with space enough to make amendments.

    Fill in all the figures you got from the question. Make sure you find the correct double entry for each of them.

    See what figures you are missing and try to think of how to get them.

    For example the credit figure on the bank for suppliers, means you paid the suppliers that amount. How would you be able to find that back? In the purchases section/ creditors.

    Just take each figure step by step and fill in as much as possible.

    It's not easy, but if you look at it as a nice puzzle, it might help.

    Hope that helps.

    Cheers,
    Rinske
  • amyjayne27amyjayne27 Trusted Regular Posts: 314Registered
    Youre right Rinske it is really hard to get the hang of, I dont know if I am going to get to grips with it!

    So with the bank account, the supplier figure on the credit side and debtors figure on the debit side are the 'missing' figures and these will come to light after I have entered all other figures?

    Getting such a headache over this!!

    Thanks for your reply,

    Amy
  • emma123emma123 Well-Known Posts: 108Registered
    i hated the arthur manderson paper! horrible! incomplete records was one topic i hated. all the past papers i've been working on all seem to start with an incomplete records question so thankfully i understand it now :)
  • RinskeRinske Font Of All Knowledge Posts: 2,453Registered
    Well, once you filled in all figures you can find, you should be able to reason the missing items.

    I don't have the assignment, so I can't say if that will show up straight away or that it might show up after you calculated the other items.

    Also don't forget to fill in opening and closing balances if you have them already. Especially the closing balances as you can move these to the profit and loss and balance sheet to see what you are missing there.
  • amyjayne27amyjayne27 Trusted Regular Posts: 314Registered
    Hi all,

    Sorry to bother you all again but I am tearing my hair out with this! Will phone my tutor tonight but thought I would ask for advice on here.

    So I am taking this as you have to find sales and purchases, so for purchases I have done:
    Payments to suppliers
    - Creditors at beginning of year
    + Creditors at the end of the year

    Is this correct? Then for sales I have tried doing the same but I only have 2 pieces of information where you usually need 3, I have debtors at start and end of year, but no sales or reciepts from debtors? Am I going about this all wrong?

    Many thanks,

    Amy
  • amyjayne27amyjayne27 Trusted Regular Posts: 314Registered
    Can anyone help me who has done this?

    I have done a trial balance after doing all the t accounts and there is a 7290 difference. Can anyone at all who has done this run through it with me please?

    Im so stressed with this, I will never understand it it seems.

    Amy
  • lauramlauram Feels At Home Posts: 49Registered
    crispy wrote: »
    Hello,

    I was bored and thought would have a go.

    I have (hopefully) attached a file to this message. Where there is a * marked in the account this shows a balancing figure, the gross profit looks a little high and may not be correct - however I think the technique is sound.

    Start from Bank Account - then use to complete the debtors/creditors control accounts to work out Purchases/Sales etc. Hope this of some help and that you can follow it through.



    hi have just had a quick look at your answer to the question and was a little confused lol, not hard i must say. basically how come you had the drawings amount of £11,000 in the debtors T account - wouldnt that of been under drawings?

    im just starting this one and am soooo confused already, dont even know which account to start with lol, am i right in thinking the capital, sales and purchases figures would be the last to be filled in as they need to be worked out after other information has been added/subtracted etc?
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