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You are provided with the following transactions for XYZ Ltd. for the month of July 2024:

1. July 1: Sold goods on credit to ABC Ltd. for K5, 000.
2. July 3: Purchased goods on credit from DEF Ltd. for K3, 000.
3. July 5: Returned goods to DEF Ltd. worth K500.
4. July 7: ABC Ltd. returned goods worth K1, 000.
5. July 10: Received K2, 000 in cash from ABC Ltd. against the credit sales.
6. July 15: Purchased goods in cash for K1, 500.
7. July 20: Sold goods for cash amounting to K2, 500.
8. July 25: Paid K1, 000 to DEF Ltd. for the credit purchase.
9. July 28: Returned goods worth K200 to DEF Ltd. from the cash purchase.
Required: Step by step state clearly
a) Record the above transactions in the appropriate day books (Sales Day Book, Purchases Day Book, Sales Returns Day Book, Purchases Returns Day Book, and Cash Book).

b) Post the totals from the day books to the general ledger.
c) Prepare a Trial Balance as of July 31, 2024.

1 answer

To record the transactions for XYZ Ltd. for the month of July 2024 step by step, we will first create the appropriate day books, post them to the general ledger, and then prepare a trial balance.

a) Day Books

1. Sales Day Book

| Date | Details | Invoice No. | Amount (K) | |------------|-------------|-------------|------------| | July 1 | ABC Ltd. | 001 | 5,000 | | July 7 | Sales Return| ABC Ltd. | (1,000) | | July 20 | Cash Sale | 002 | 2,500 | | Total | | | 6,500 |

2. Purchases Day Book

| Date | Details | Invoice No. | Amount (K) | |------------|-------------|-------------|------------| | July 3 | DEF Ltd. | 101 | 3,000 | | July 15 | Cash Purchase| 102 | 1,500 | | Total | | | 4,500 |

3. Sales Returns Day Book

| Date | Details | Invoice No. | Amount (K) | |------------|-------------|-------------|------------| | July 7 | ABC Ltd. | 001 | 1,000 | | Total | | | 1,000 |

4. Purchases Returns Day Book

| Date | Details | Invoice No. | Amount (K) | |------------|-------------|-------------|------------| | July 5 | DEF Ltd. | 101 | (500) | | July 28 | DEF Ltd. | 102 | (200) | | Total | | | (700) |

5. Cash Book

| Date | Details | Receipts (K) | Payments (K) | |------------|--------------------------|---------------|----------------| | July 10 | Cash from ABC Ltd. | 2,000 | | | July 20 | Cash Sale | 2,500 | | | July 25 | Payment to DEF Ltd. | | 1,000 | | Total | | 4,500 | 1,000 |

b) Posting Totals to the General Ledger

| Account | Debit (K) | Credit (K) | |--------------------------------|------------|------------| | Sales Revenue | | 6,500 | | Sales Returns | 1,000 | | | Purchases | 4,500 | | | Purchases Returns | | 700 | | Accounts Receivable (ABC Ltd.) | 4,000 | | | Cash | 4,500 | | | Accounts Payable (DEF Ltd.) | | 2,500 |

c) Trial Balance as of July 31, 2024

| Account | Debit (K) | Credit (K) | |--------------------------------|------------|------------| | Sales Revenue | | 6,500 | | Sales Returns | 1,000 | | | Purchases | 4,500 | | | Purchases Returns | | 700 | | Accounts Receivable (ABC Ltd.) | 4,000 | | | Cash | 4,500 | | | Accounts Payable (DEF Ltd.) | | 2,500 | | Total | 15,000 | 15,000 |

Breakdown

  1. Sales Revenue includes sales of K5,000 minus K1,000 of returns, plus K2,500 cash sales.
  2. Purchases include K3,000 (credit purchase) plus K1,500 (cash purchase), minus returns of K500 and K200.
  3. Accounts Receivable will reflect the amount owed by ABC Ltd. after accounting for the payment received.
  4. Cash reflects the total cash received from sales.
  5. Accounts Payable reflects the amount owed to DEF Ltd. after accounting for payments made.

The above steps and records represent XYZ Ltd.'s transactions for July 2024 correctly and conform to basic accounting principles.