Question
Beaumont Wholesale uses a periodic inventory system. At July 1, 2025 its ledger showed: Cash $30,000, Inventory $12,000, and Share Capital - Ordinary $42,000. The following transactions occurred during July 2025.
| Date | Transaction |
|---|
| July 3 | Purchased merchandise on account from Keystone Mills for $9,600, terms 2/10, n/30. |
| July 5 | Paid $450 cash for freight on the July 3 purchase (FOB shipping point). |
| July 8 | Returned unsuitable merchandise with an invoice price of $1,100 to Keystone Mills for full credit. |
| July 12 | Paid Keystone Mills the balance due, taking the purchase discount. |
| July 15 | Sold merchandise on account for $11,400, terms 1/15, n/30. |
| July 20 | Granted a customer a credit of $900 for goods returned from the July 15 sale. |
| July 28 | Received full payment of the July 15 account within the discount period. |
| July 31 | Paid monthly salaries of $3,600. |
Instructions:
- Journalize the July transactions using a periodic inventory system (use Purchases, Purchase Returns and Allowances, Purchase Discounts and Freight-In accounts; no cost-of-goods-sold entries are made at the time of sale).
- Post to the Cash ledger account (running balance format), starting from the July 1 balance.
- Prepare a trial balance at July 31, 2025. (Under the periodic system the Inventory account still shows its July 1 balance.)
Statements in this challenge
- Journal EntriesJournal Entry
- Cash Ledger AccountLedger
- Trial BalanceTrial Balance
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