FSTP Incomplete Records AAT Level 3 FSTP Incomplete Records

Sudoku Puzzle 8 1 2 4 5 3 6 7 9 Discussion on what is missing and how we can find the missing numbers

Incomplete Records Tool Kit Bank & Cash Accounting Equation Mark up & Margin Control Accounts

The Accounting Equation Discuss the formula for the Accounting equation

The Accounting Equation Assets = Capital + Liabilities Or Capital = Assets – Liabilities Liabilities = Capital - Assets Capital is Net Assets (SFP)

The Accounting Equation Assets £325,000 Capital £125,000 Liabilities? Assets = Capital + Liabilities £325,000 = £125,000 + Liabilities £325,000 - £125,000 = Liabilities £200,000 = Liabilities Assets £325,000 Capital 125,000 what are the liabilities?

Calculate the Capital Invested £ Fixtures and fittings at cost 7,000 Accumulated depreciation - fixtures and fittings 4,000 Motor vehicles at cost 12,000 Accumulated depreciation - motor vehicles 6,800 Inventories 4,500 Trade receivables 5,200 Bank 1,230 Trade payables 3,700 Prepayments 450 Accruals 2,000 Highlight Assets

Calculate the Capital Invested £ Fixtures and fittings at cost 7,000 Accumulated depreciation - fixtures and fittings (4,000) Motor vehicles at cost 12,000 Accumulated depreciation - motor vehicles (6,800) Inventories 4,500 Trade receivables 5,200 Bank 1,230 Trade payables 3,700 Prepayments 450 Accruals 2,000 Highlight Assets Assets £7000 + £12,000 + 4,500 + 5,200 + 1,230 + 450 – 4000 – 6800 = 19580

Calculate the Capital Invested £ Fixtures and fittings at cost 7,000 Accumulated depreciation - fixtures and fittings (4,000) Motor vehicles at cost 12,000 Accumulated depreciation - motor vehicles (6,800) Inventories 4,500 Trade receivables 5,200 Bank 1,230 Trade payables 3,700 Prepayments 450 Accruals 2,000 Liabilities 3,700 + 2,000 = 5700

Calculate the Capital Invested £ Fixtures and fittings at cost 7,000 Accumulated depreciation - fixtures and fittings (4,000) Motor vehicles at cost 12,000 Accumulated depreciation - motor vehicles (6,800) Inventories 4,500 Trade receivables 5,200 Bank 1,230 Trade payables 3,700 Prepayments 450 Accruals 2,000 Assets = Capital + Liabilities Assets – Liabilities = Capital £19,580 – £5,700 = Capital £13,880 Any drawings will be deducted from the Capital figure

Have a go at this one . . . . . . £ Vehicles at cost 13,500 Accumulated depreciation - Vehicles (5,000) Machinery at cost 12,500 Accumulated depreciation - Machinery (3,125) Inventories 3850 Trade receivables 7,365 Bank 8525 Trade payables 9,200 Prepayments 290 Accruals 340 Students to do – feedback answers and write calculation on white board Assets = 13500 -5000 + 12500 – 3125 + 3850 + 7365 + 8525 + 290= 37905 Liabilities = 9200 + 340 = 9540 Capital = Assets – Liabilities Capital = £37,905 – 9,540 Capital = £28,365

W3S1 Worksheet 1 Calculate Capital Total Assets Minus Total Liabilities What are net assets?

Calculating Closing Capital Question 1 Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year. What was her closing capital for the year? Using this basic calculation we can find a missing value whether it be Capital, Drawings, Profit etc

Calculating Closing Capital Question 1 Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year. What was her closing capital for the year? Opening Capital (Net Assets) Less Drawings Add Profit Closing Capital Using this basic calculation we can find a missing value whether it be Capital, Drawings, Profit etc

Calculating Closing Capital Question 1 Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year. What was her closing capital for the year? Opening Capital (Net Assets) £20,450 Less Drawings Add Profit Closing Capital Using this basic calculation we can find a missing value whether it be Capital, Drawings, Profit etc

Calculating Closing Capital Question 1 Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year. What was her closing capital for the year? Opening Capital (Net Assets) £20,450 Less Drawings (£1,500) Add Profit Closing Capital Using this basic calculation we can find a missing value whether it be Capital, Drawings, Profit etc

Calculating Closing Capital Question 1 Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year. What was her closing capital for the year? Opening Capital (Net Assets) £20,450 Less Drawings (£1,500) Add Profit £3,200 Closing Capital Using this basic calculation we can find a missing value whether it be Capital, Drawings, Profit etc

Calculating Closing Capital Question 1 Mikaela’s Kakes made a profit for the year of £3,200. Her opening net assets were £20,450 and she took drawings of £1,500 for the year. What was her closing capital for the year? Opening Capital (Net Assets) £20,450 Less Drawings (£1,500) Add Profit £3,200 Closing Capital £22,150 Using this basic calculation we can find a missing value whether it be Capital, Drawings, Profit etc

W3S1 Calculating Capital Worksheet 1 Continue with the practice questions (2-5) Opening Capital (Net Assets) Additional Capital Less Drawings Add Profit Closing Capital Check answers as they complete

Net Assets = Capital So: Net Assets = Capital + Profit – Drawings If Net Assets increase (or decrease) during a year then one, two or each of capital introduced, profit (or loss) and drawings must have changed. Check answers as they complete

W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Net Assets at 01/06/X3 12794 Receivables 3358 Payables 5065 Motor Vehicle 11239 Accruals 735 Bank Balance 1401 Cash 566 Fixtures and Fitting 9562 Prepayments 708 Inventory 4871 Loan 3902 Drawings 1923 Capital 5000 Question 1 Soren The informaton we need is the accounting equation

W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Net Assets at 01/06/X3 12794 Receivables 3358 Payables 5065 Motor Vehicle 11239 Accruals 735 Bank Balance 1401 Cash 566 Fixtures and Fitting 9562 Prepayments 708 Inventory 4871 Loan 3902 Drawings 1923 Capital 5000 Remember Net Assets = Captal + Profit – Drawings so changes will be casued by inc/dec components

Identify the Assets & Liabilities W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Net Assets at 01/06/X3 12794 Receivables 3358 Payables 5065 Motor Vehicle 11239 Accruals 735 Bank Balance 1401 Cash 566 Fixtures and Fitting 9562 Prepayments 708 Inventory 4871 Loan 3902 Drawings 1923 Capital 5000 Identify the Assets & Liabilities Question 1 Soren The informaton we need is the accounting equation

Identify the Assets & Liabilities W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Net Assets at 01/06/X3 12794 Receivables 3358 Payables 5065 Motor Vehicle 11239 Accruals 735 Bank Balance 1401 Cash 566 Fixtures and Fitting 9562 Prepayments 708 Inventory 4871 Loan 3902 Drawings 1923 Capital 5000 Identify the Assets & Liabilities Question 1 Soren The informaton we need is the accounting equation

Identify the liabilities W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Net Assets at 01/06/X3 12794 Receivables 3358 Payables 5065 Motor Vehicle 11239 Accruals 735 Bank Balance 1401 Cash 566 Fixtures and Fitting 9562 Prepayments 708 Inventory 4871 Loan 3902 Drawings 1923 Capital 5000 Total Assets £31,705 Identify the liabilities Question 1 Soren The informaton we need is the accounting equation

Identify the liabilities W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Total liabilities £9702 Net Assets at 01/06/X3 12794 Receivables 3358 Payables 5065 Motor Vehicle 11239 Accruals 735 Bank Balance 1401 Cash 566 Fixtures and Fitting 9562 Prepayments 708 Inventory 4871 Loan 3902 Drawings 1923 Capital 5000 Identify the liabilities Question 1 Soren The informaton we need is the accounting equation

W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Total Assets £31,705 Total liabilities £9,702 Less Equals Net Assets £22,003 Net Assets = Capital + Profit - Drawings

Opening Net Assets Closing Net Assets Change in Net Assets W3S1 Calculating Capital Worksheet 2 Calculate the profit for the y/e 31 May 20X4 Opening Net Assets £12,794 £22,003 Closing Net Assets £9,209 Change in Net Assets The change in net assets means that either the Capital, Profit or Drawings has changed. We know that Capital increased by £5000 and Drawings were £1923 Net Assets = Capital + Profit - Drawings 22,003 = 5000 + Proft – 1923 becomes 22,003 + 1923 – 5000 = Profit 18926 If Net Assets increase (or decrease) during a year then one, two or each of capital introduced, profit (or loss) and drawings must have changed.

Net Assets = Capital + Profit – Drawings Change in net assets of £9209 Caused by £5000 additional Capital Less £1923 drawings SO £6132 must be the increase in profit

W3S1 Calculating Capital Worksheet 2 Complete remaining questions on worksheet 2

Methods - Mark-ups and margins Are used to apply information about known relationships between cost, profit and selling price to determine gross profit. Mark up & Margin

Margin Sales (Represent the 100%) Cost of Sales 80% Profit 20% The Profit margin is the percentage of gross profit made expressed as a percentage of sales. Sales will always equal the cost of sales and the profit added together. Sales (Represent the 100%) Cost of Sales 80% Profit 20%

Now we know this we can used it to find any ‘missing’ information. Margin The Profit margin is the percentage of gross profit made expressed as a percentage of sales. Sales will always equal the cost of sales and the profit added together. Sales (Represent the 100%) £2500 Cost of Sales 80% 20% Now we know this we can used it to find any ‘missing’ information.

Now we know this we can used it to find any ‘missing’ information. Margin The Profit margin is the percentage of gross profit made expressed as a percentage of sales. Sales will always equal the cost of sales and the profit added together. Sales (Represent the 100%) £2500 Cost of Sales (80%) £2000 £500 (20%) Now we know this we can used it to find any ‘missing’ information.

Margin - Examples Sales £100,000 Cost of Sales Profit 25% Sales £4,000 Sales Cost of Sales £65,000 Profit 15% Sales £65,500 Cost of Sales Profit 35%

Margin – Examples - Answers Sales £100,000 Cost of Sales £75,000 Profit £25,000 Sales £11,429 Cost of Sales £7,429 Profit £4,000 Sales £76,471 Cost of Sales £65,000 Profit £11,471 Sales £65,500 Cost of Sales £42,575 Profit £22,925

Mark-up Sales 125% Cost of Sales100% Profit 25% Sales £5625 (125%) A percentage of the cost of sales added to the cost in order to calculate the selling price. When using this method the cost of sales will always represent 100%. Sales 125% Cost of Sales100% Profit 25% Sales £5625 (125%) Cost of Sales £4500 (100%) Profit 1125 (25%)

Mark Up - Examples Sales £5500 Cost of Sales Profit 15% Sales 140% £2500 Sales £150,000 Cost of Sales Profit 35% Sales Cost of Sales £50,000 Profit 25%

Mark Up – Examples - Answers Sales £5,500 Cost of Sales £4,783 Profit £717 Sales £8,750 Cost of Sales £6,250 £2,500 Sales £150,000 Cost of Sales £111,111 Profit £38,889 Sales £62,500 Cost of Sales £50,000 Profit £12,500

W3S1 Mark up & Margin worksheet

Method Receivables & Payables Control Accounts Receivables and payables control accounts may be constructed to identify any one missing figure from the control account. Note that you may need to set up and use several standard workings for the control accounts to find the link to complete the missing information. Control Accounts

Sales Ledger Control Account What do we know about the SLCA? Trade Receivables Account Debtors Control Account

Dr Sales Ledger Control Account CR Balance b/d Receipts from Debtors Sales Invoices issued Credit notes issued Discounts Allowed Balance b/d Identify items that increase the SLCA & Decrease the SLCA – Each one of these items can be deduced if given enough info

Using the information above find Credit Sales value. Balance b/d £6,000 How it works . . . . . Using the information above find Credit Sales value. Balance c/d £3,200 Cash Received £73,300 Enter the info we already have to find the missing figure

Dr Sales Ledger Control Account CR Balance b/d £6,000 How it works . . . . . Find Credit Sales Balance c/d £3,200 Cash Received £73,300 Dr Sales Ledger Control Account CR Balance b/d £6,000 Cash Received £73,300 Credit Sales £70,500 Balance c/d £3,200 Enter the info we already have to find the missing figure £76,500 £76,500

Now try ths one . . . . . . .

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850, Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850 Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR Opening Balance £4,750

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850 Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR Opening Balance £4,750 Sales Day Book £75,850

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850 Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR Opening Balance £4,750 Sales Returns £16,350 Sales Day Book £75,850

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850 Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR Opening Balance £4,750 Sales Returns £16,350 Sales Day Book £75,850 Discounts Allowed £398

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850 Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR Opening Balance £4,750 Sales Returns £16,350 Sales Day Book £75,850 Discounts Allowed £398 Closing Balance £5,785

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850 Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR Opening Balance £4,750 Sales Returns £16,350 Sales Day Book £75,850 Discounts Allowed £398 Closing Balance £5,785 £80,600

Dr Sales Ledger Control Account CR Calculate the bank receipts from debtors Opening balance £4,750, Invoices issued £75,850 Closing balance £5,785, Discounts Allowed £398, Sales Returns £16,350 Dr Sales Ledger Control Account CR Opening Balance £4,750 Sales Returns £16,350 Sales Day Book £75,850 Discounts Allowed £398 Bank Receipts £58,067 Closing Balance £5,785 £80,600

Purchase Ledger Control Account What do we know about the PLCA? Trade Payables Account Creditors Control Account

Dr Purchase Ledger Control Account CR Invoices Received Payments made Balance c/d Credit Notes Received Discounts Received Balance b/d Dr Purchase Ledger Control Account CR Write on slide?

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR Balance b/d £7,450

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR Balance b/d £7,450 Purchases £99,355

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR Balance b/d £7,450 Purchases £99,355 Balance c/d £9,855

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR Purchase Returns £16,350 Balance b/d £7,450 Purchases £99,355 Balance c/d £9,855

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR Purchase Returns £16,350 Balance b/d £7,450 Bank Payments £80,000 Purchases £99,355 Balance c/d £9,855

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR Purchase Returns £16,350 Balance b/d £7,450 Bank Payments £80,000 Purchases £99,355 Balance c/d £9,855 106,805

Dr Purchase Ledger Control Account CR Calculate the Discounts received from creditors. Opening balance £7,450, Invoices received £99,355 Closing balance £9,855, Purchase Returns £16,350 Bank payments £80,000 Dr Purchase Ledger Control Account CR Purchase Returns £16,350 Balance b/d £7,450 Bank Payments £80,000 Purchases £99,355 Discounts Received £600 Balance c/d £9,855 106,805

VAT Control Account

Dr VAT Control Account Cr Where does the info come from to populate this control account?

VAT Control Account VAT on purchases Balance due to HMRC   VAT on purchases Balance due to HMRC VAT on sales returns VAT on sales VAT on cash purchases VAT on purchases returns VAT on expenses VAT on cash sales Payment to HMRC Refund from HMRC Balance due from HMRC

Control Account Practice Questions

- Method - The Cash & Bank Account Approach Used to construct records of cash and bank transactions as a basis for identifying and classifying those transactions into items of income or expense, or that they relate to changes in items included in the statement of financial position. Need an example, also practice questions

Now try this . . . Opening Bank Balance £3,580 Cheque payments: Salary £7,500 Rent £600 Rates £350 Purchases £19,500 The closing balance on the bank statement was £7,450 but a cheque payment of £1250 to a supplier had not yet been presented at the year end. What is the value of the receipts into the bank for the year?

Balance b/d Salary 3,580 7,500 Rent 600 Rates 350 Purchases 19,500 Bank £ Balance b/d Salary 3,580 7,500 Rent 600 Rates 350 Purchases 19,500 Balance c/d 7,450 35,400

Balance b/d Salary 3,580 7,500 Rent 600 Rates 350 Purchases 19,500 Bank £ Balance b/d Salary 3,580 7,500 Rent 600 Rates 350 Purchases 19,500 Balance c/d 7,450 35,400 35,400

Balance b/d Salary 3,580 7,500 Rent 600 Receipts Rates 350 Bank £ Balance b/d Salary 3,580 7,500 Rent 600 Receipts Rates 350 Purchases 19,500 Balance c/d 7,450 35,400 35,400

Balance b/d Salary 3,580 7,500 Rent 600 Receipts Rates 350 Bank £ 31,820 Balance b/d Salary 3,580 7,500 Rent 600 Receipts Rates 350 Purchases 19,500 Balance c/d 7,450 35,400 35,400

Bank Practice Questions

Now try this. . . Hint – You will need a bank account AND a cash Account Opening Bank Balance £27,500 Cash £1,800 Cheque payments: Salaries £23,800 Rent £4,600 Rates £2,350 Purchases £28,450 The closing balance on the bank statement was £16,700, but a payment for £2,800 had not yet been presented at the year end. The owner has withdrawn money freom the bank for his own use but doesn’t know how much. During the year £53,000 was received in cash from customers for sales. Cash expenses totalled £950 and £51,200 was paid into the bank.

Balance b/d 27,500 Salaries 23,800 51,200 Rent 4,600 Cash receipts Bank £ 78700 Balance b/d 27,500 Salaries 23,800 51,200 Rent 4,600 Cash receipts Rates 2,350 Purchases 28,450 5,600 Drawings Closing bank £16700- £2800 = £13900 Balance c/d 13,900

Balance b/d 1800 Expenses 950 Cash receipts 53000 Bank 51200 £ 54800 Balance b/d 1800 Expenses 950 Cash receipts 53000 Bank 51200 Balance c/d 2650 Cash

Trading account (Mark up) £ £ Sales (50% mark up) 18000 (150%) Cost of sales Opening inventories 2000 Purchases 11000 13000 To calculate Cost of Sales = Sales represents 150% so £18000 / 150 x 100 = £12,000 which is the COS 100% To calculate Purchases Cost of Sales 12000 = Opening inventory £2,000 + Purchases – Closing Inventory £1000 P = 12000 – 2000 + 1000 P = 11000 To calculate Gross Profit Sales £18,000 – COS £12,000 = £6,000 Closing inventories 1000 Cost of sales 12000 (100) Gross profit 6000 (50%)

Trading account (Margin) £ £ Sales 40000 (100%) Cost of sales Opening inventories 3500 Purchases 11250 14750 Cost of Sales = 30% of Sales so 40000 x 30% = 12000 COS £12,000 = Opening Invoices £3,500 + Purchases – Closing Inventory £2,750 Cos £12,000 - £3,500 + £2750 = Purchases £11,250 Closing inventories 2750 Cost of sales (30% Margin) 12000 (30%) Gross profit 28000 (70%)

You will need to remember The accounting equation (Assets = Capital + Liabilities) Net assets EQUALS Capital Control Account Layouts - SLCA, PLCA, VAT Accruals & Prepayments double entry ETBs and end-of-year adjustments Margin & Mark up