The school holidays have started. It occurred to John that, during the holidays, children need toys to play with. He set up a business in the name of Creative Traders and started selling toys. The following transactions took place in January 20X3: 1. On 1 January 20X3 he invested cash of Tshs50 million in the business. 2. John opened a bank account and deposited Tshs5 million on 02/01/20X3. The bank allotted him the account number C/A-6630 3. He approached two suppliers from whom he bought the following toys on credit: (a) Toys Company- Invoice number 88 dated 02/01/20X3 for Tshs15 million. (b) Fun Inc.- Invoice number 66 dated 05/01/20X3 for Tshs25 million. Fun Inc. gave a trade discount of Tshs1 million. (c) Toys Company- Invoice number 145 dated 31/01/20X3 for Tshs16 million. 4. On 03/01/20X3 he found some defects in the material which was purchased on 02/01/20X3 from Toys Company and returned the defected goods. The value of these goods was Tshs5 million. 5. He also made cash purchases from Fun Inc. on 05/01/20X3 worth Tshs20 million. He incurred transportation charges of Tshs2.5 million in cash. 6. He appointed a worker, to manage his business, whom he pays Tshs2 million in cash at the end of every month. 7. The worker takes care of the inventory and marketing. He has found two buyers for his products. The two buyers are Enjoy Ltd and Getway Traders. The sales to these customers were: (a) Enjoy Ltd- Invoice No-1 dated 06/01/20X3 Tshs15 million. (b) Getway Traders- Invoice No-2 dated 15/01/20X3 Tshs30 million. (c) Enjoy Ltd- Invoice No-3 dated 31/01/20X3 Tshs16 million. 8. On 15/01/20X3 John issued a cheque for Tshs22 million to Fun Inc. The amount payable was Tshs24 million but he took a cash discount on this payment. 9. On 23/01/20X3 Getway Traders returned some goods worth Tshs8 million. 10. John made cash sales worth Tshs30 million on 10/01/20X3. However he incurred expenditure on transportation of Tshs8 million. He paid by cheque. 11. John received cheques from the customers as follows: (a) Enjoy Ltd Tshs15 million on 06/01/20X3. (b) Getway Traders Tshs22 million on 20/01/20X3. 12. John paid Tshs10 million in cash to Toys Company on 05/01/20X3 for credit purchases made. 13. On 31/01/20X3 John withdrew Tshs10 million from the business for personal expenses. John has been following the principles of double entry, but is concerned that he may make a mistake. He asks you, as an accountant, how he can ensure mathematical accuracy. You suggest and he prepares a trial balance. Check the entries that have been made in the books of prime entry, check how they are recorded in the ledger, find the closing balance of each account and prepare a trial balance as at 31 January 20X3.
