Question
Ramirez Trading Co. began January 2025 with a cash balance of $5,000 (debit). During the month, the following transactions took place:
- Jan 5 — Received cash from sale of goods, $3,000
- Jan 10 — Paid rent for the month, $1,200
- Jan 15 — Paid wages to staff, $800
- Jan 20 — Received cash from a customer (debtor) in full settlement of their account, $2,500
- Jan 25 — Paid cash for purchases of inventory, $1,500
- Jan 28 — Received proceeds of a bank loan, $4,000
Required: Prepare the Cash Account for January 2025 in three-column (running balance) format. Show the opening balance brought down (Balance b/d), each transaction in date order with the correct particulars and Dr/Cr side, and the balance carried down (Balance c/d) at 31 January 2025.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — Presentation of Financial Statements
Work the cycle in its fixed order: journalise, post to the ledger, extract an unadjusted trial balance, pass adjusting entries, extract an adjusted trial balance, prepare the statements, then close the temporary accounts. Each step consumes the output of the one before it, so an error early on propagates all the way to the closing entries rather than staying local.
Common mistakes
- Preparing the financial statements from the unadjusted trial balance instead of the adjusted one.
- Closing permanent accounts — assets, liabilities and capital carry forward; only revenue, expense and drawings/dividends close.
- Forgetting that the post-closing trial balance should contain no income statement accounts at all.
Further readingIAS 1: what goes where in a full set of statements