Question
Fenwick Hardware Store started trading on 1 April 2025. During its first month, the following transactions took place:
- Apr 1 — The owner invested cash into the business, $20,000
- Apr 3 — Purchased goods on credit from a supplier, $9,000
- Apr 5 — Made cash sales, $4,000
- Apr 8 — Sold goods on credit to a customer, $6,500
- Apr 12 — Paid the supplier $5,000 on account
- Apr 15 — Received $4,000 in cash from the credit customer
- Apr 18 — Paid rent for the month, $1,200
- Apr 22 — The owner withdrew cash for personal use, $800
- Apr 25 — The owner introduced a further $3,000 of capital
- Apr 28 — Paid the supplier a further $3,000 on account
Required: Prepare the following five ledger accounts for April 2025 in T-account (two-sided) format: Cash, Accounts Receivable, Accounts Payable, Sales Revenue, and Capital. Show each entry with the correct particulars (naming the other account involved), date, and amount on the correct side, and balance off Cash, Accounts Receivable, Accounts Payable and Capital, carrying their balances down to May. Leave Sales Revenue open: it is a nominal account, closed to the income statement at the period end rather than carried down.
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