Answers to balance sheet questions
a)
| Stock of sand, cement, bricks | Current assets and therefore belongs on the balance sheet |
| Air compressor bought for cash | Fixed asset and therefore belongs on the balance sheet |
| Air compressor bought on credit | Fixed asset and therefore belongs on the balance sheet |
| Air compressor hired | Not a balance sheet item. If an item is not owned by the business then it can not be counted in it's fixed assets. An asset hired for temporary use is not owned by the business hiring it and therefore is not accounted for as a fixed asset. However the cost of hiring it will be an expense in the profit and loss account. |
| Wheelbarrow | Fixed asset and therefore belongs on the balance sheet |
| Lorry | Fixed asset and therefore belongs on the balance sheet |
| Fuel | This is not a balance sheet item. It belongs in the profit and loss account along with all the other expenses incurred. |
| The wife's washing machine | This is not owned and used by the business and can not be counted
as an asset on the balance sheet. It is treated like any other withdrawal
of assets from the business as drawings.
The most common form of assets withdrawn is cash taken by the owner. |
| Bank overdraft | Is a current liability and therefore is a balance sheet item |
| £250 owing from a customer | Is a debtor and belongs under current assets in the balance sheet |
| Lorry road license | Is an expense and not an asset and therefore belongs in the profit and loss account |
| Envelopes | These small value items are expected to be used up quickly and are
not therefore called fixed assets which are expected to last
for a number of years. They are used up during normal business operations and are therefore treated as an expense. They would appear as stationary in the profit and loss account |
| Cash | Current asset and therefore belongs on the balance sheet |
| £2,500 owing to aunty | Is a liability. If it needs to be paid back within a year it is a current liability. Otherwise it is a long term loan. Either way it belongs on the balance sheet. |
Equipment 60 60 60 60 60 60 60 60 60 60 54
Stocks 50 40 40 40 40 40 40 12 12 44 44
Debtors 35 35 35 35 35 5 5 37 37 37 37
Prepayments 7 7 7 7 7 7 7 7 7 7 7
Bank 15 30 25 55 5 35 3 3 16 16 16
Cash
3 3 2
2 2 2
2 14 1
1 1
290 295 289 299 249 249
217 233 233 265 259
Liabilities
Capital
141 146 140 150 150 150
150 166 166 166 160
Loan 100 100 100 100 50 50 50 50 50 50 50
Creditors
42 42 42
42 42 42
10 10 10
42 42
Accruals
7 7
7 7 7
7 7 7
7 7 7
290 295 289 299 249
249 217 233 233 265 259
Answers to complex balance sheet question
A)Sold stocks for £15 cash and banked the cash. Stocks originally
cost £10 and the profit of £5 shows in the
increase in capital. Capital = capital introduced + profits - drawings
B)£5 has been withdrawn from the bank and £1 from cash.
Because capital has gone down we can assume that this is caused by drawings
increasing and can therefor deduce that the £6 withdrawn is drawings.
C)Sold land and buildings valued at £20 for £30 and
banked the £30.The profit of £10 shows in the increase in capital.
D)Repaid £50 of the loan using bank funds.
E)Received £30 form customers (debtors) and banked the money.
F)Paid £32 to suppliers (creditors) using bank funds
G)Sold stock costing £28 for a total of £44. £32
is on credit terms and £12 is a cash sale.
The profit of £16 shows as an increase in capital.
H)Banked £13 from cash
I)Purchased £32 stock on credit terms.
J)Provided depreciation of £6. This reduces both the profit (seen as a decrease in capital) and equipment.