LIVE SESSION 2

QUESTION TO SUBMIT

Q1: Shoe Shop—Double-entry bookkeeping

Chris runs a shop in Bristol, Shoe Shop. The shop sells fashionable shoes and
accessories. On 30 June 2018 his business assets and liabilities were:

£
Cash 125
Bank balance (overdraft) 11,000
Trade receivables 16,750
Trade payables 14,625
Inventory (at cost) 40,575
Capital 31,825

Chris decided to expand the business and sell clothes.

On 1 July he:

1. Arranges to rent the adjoining shop premises. His total monthly rent is now £625 per
calendar month. (See list of transactions for payment of rent).

2. Borrows £20,000 from his bank, and uses it to buy a van for the business. This is a
special business loan, which is repayable in three years’ time and carries interest at
13%.

3. Pays £6,250 out of his personal bank account to have the new premises refitted.

His summarised transactions for the rest of the year are as follows (they are not in
chronological order):

4. Bought stock on credit, £489,625.

5. Bought stock for cash, £16,550.

6. Sold stock which cost £63,000, for £84,000 cash.

7. Paid creditors £477,225 by cheque.

8. Sold stock which cost £394,500, for £526,000 on credit.

9. Collected £517,750 from his debtors.

10. Returned some damaged goods to his suppliers. These cost £8,500, but Chris had
not yet paid for them.
 11. Paid the following (by cheque):

£
Rent (see 1.) 7,500
Shop wages 35,000
Interest (see 2.) 2,600
Electricity 4,500
Telephone 1,750
Other expenses 3,050
Holiday 1,000

12. Personal drawings were £500 per month. Shop takings were banked daily. On
June 30th 2019 cash in the till was still £125.

Required:

1. Double-entry accounts reflecting the above transactions. (Hint: as a constant ‘float’ of

£125 is maintained in the shop till, you may treat cash transactions as movements on the
business's bank account.) You should show all workings clearly.

2. A trial balance at 30 June 2019.

(You are not required to prepare a statement of financial position or income

statement. However the suggested solution will include these statements for
completeness).