Lindastarted the business of buying and selling toysin Oxford on the 1stof October 2020. She is preparing accounts to 31st October2020. She contributed to the business with £8,000 in the Bank, £5200 cash, and 3,000 Van. The transactions during the month areas follows:

2/10Bought a new Laptop £1000 from a local shop in Oxford and paid by cheque

4/10Purchased toys (goods)£2450on credit from Toys Ltd

5/10 Sold goods for £1500and received the money in Bank

12/10Paid in Cash £80for repairing laptop18/10Goods returned toToys Ltd £100

21/10Receivedrent for part of the premises by cheque £500

23/10Sold goods to Fred£1900; from this amount £1500cash received immediately and the rest remainson credit.

23/10Sold goods of £500 to David and received cash24/10Bought a second-handcar from Oxford motor vehicle auctionfor business use by issuing a cheque £250026/10Paid ƚhe monƚh͛s

ǁages to the part-time shopkeeper by cheque£82030/10

Paid rent by cheque £100031/10

Linda has also paid £1600 from the business bank account for a week-long holiday in Florida.

She has asked you whether she can class this as business expenses since it has enabled herto recover from the stresses and strain of running herown business.

Required:

a)Write double entry record the transactions in T-accounts.

Recording BusinessTransactions BA30592E2| Page

b)Balance the accounts and bring down an opening balance

 

c)Extract a Trial balance as at31st October 2020

 

d)Prepare an Income Statement forthe period ended 31st October 2020

The closing inventory is £ 250.00

e)Prepare a Statement of Financial Position as at 31st October 2020.

f)Write a brief letter to Linda explaining what drawings are concerning small business and answering her query concerning her holiday.

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