ACCOUNTING ENTR

Birmingham Innovations is a wholesaler of plasterboards. Birmingham Innovations has only started operating in Octob
The following transactions happened during the month of October (first month of operation):

365 days Straight Line method of

VAT = 20%
in a year depreciation & amortisation

OCTOBER
1 On 01/10/2021 - The Directors deposited £150,000 into the company's bank account.
2 On 01/10/2021 - Paid £2,000 to register their patent for their unique plasterboard design and technology
3 On 02/10/2021 - Paid Rent for it's offices and Warehouse in Birmingham. Monthly Rent is £12,000 + VAT
4 On 03/10/2021 - Purchased 10,000 plasterboards for £5+VAT each - Payment terms 30 days from the invoice date
5 On 08/10/2021 - Purchased an office desk for one of the directors for £2,000+VAT - paid straight away
6 On 10/10/2021 - Sold 8,000 plasterboards to ABC Co. for £8.50 + VAT each - Payment terms 30 days from the invoic
7 On 13/10/2021 - Paid £6,000 + VAT for a one-year subscription for its accounting system
8 On 21/10/2021 - Paid a Marketing Agency £9,000 + VAT to cover 3 months (90 days) online advertising
On 30/10/2021 - They approached an accounting firm to do their bookkeeping. They agreed on a monthly charge of
9
£500+VAT per month. They paid for October's service on 01/11/2021

NOVEMBER
1 On 01/11/2021 - paid the bookkeepers
2 On 02/11/2021 - Paid Rent for it's offices and Warehouse in Birmingham. Monthly Rent is £12,000 + VAT
3 On 03/11/2021 - Purchased 12,000 plasterboards for £6 + VAT each - Payment terms 30 days from the invoice date
4 On 04/11/2021 - Paid £10,000 for a 1-year building insurance
5 On 11/11/2021 - Sold 10,000 plasterboards for £9.00 + VAT each. Payment terms 30 days from the invoice date
6 On 12/11/2021 - Paid for the 10,000 plasterboards purchased in October
7 On 12/11/2021 - Received the full amount from ABC for the stock sold in October
8 On 31/11/2021 - Paid the bookkeeping company for the month of November

You are employed by the accounting firm that Birmingham Innovations approached on the 30th of October.

1 You are going to prepare the accounting journals for all the transactions listed above.

2 You will prepare the end of month closing journals

Birmingham Innovations uses FIFO to value its stock in hand
Birmingham Innovations uses the straight line method to depreciate/amortise its assets. 5 years from th
Prepayments are reduced by the same amount monthly (straight line amortisation)

3 You will prepare an October and November Trial Balance

4 You will prepare an October and November P&L and Balance Sheet
 ACCOUNTING ENTRY-LEVEL TEST

tarted operating in October 2021.

ht Line method of 5-Years Useful life on FIFO Stock Valuation

tion & amortisation all assets Method

and technology
£12,000 + VAT
ys from the invoice date
raight away
s 30 days from the invoice date

e advertising
d on a monthly charge of

£12,000 + VAT
ays from the invoice date

rom the invoice date

th of October.

ts assets. 5 years from the date the asset is purchased is the lifetime of all its assets
OCTOBER

1 On 01/10/2021 - The Directors deposited £150,000 into the company's bank account.

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

2 On 01/10/2021 - Paid £2,000 to register their patent for their unique plasterboard design and technology

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

3 On 02/10/2021 - Paid Rent for it's offices and Warehouse in Birmingham. Monthly Rent is £12,000 + VAT

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

4 On 03/10/2021 - Purchased 10,000 plasterboards for £5+VAT each - Payment terms 30 days from the invoice date

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

5 On 08/10/2021 - Purchased an office desk for one of the directors for £2,000+VAT - paid straight away

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

6 On 10/10/2021 - Sold 8,000 plasterboards to ABC Co. for £8.50 + VAT each - Payment terms 30 days from the invoice date
 DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT
DR
DR
DR
CR
CR
CR

7 On 13/10/2021 - Paid £6,000 + VAT for a one-year subscription for its accounting system

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

8 On 21/10/2021 - Paid a Marketing Agency £9,000 + VAT to cover 3 months online advertising

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

9 On 30/10/2021 - They approached an accounting firm to do their bookkeeping. They agreed on a monthly charge of £500+V

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

End-of-month Closing Entries (31/10/2021)

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
DR
DR
CR
CR
CR
CR

NOVEMBER
1 On 01/11/2021 - paid the bookkeepers

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

2 On 02/11/2021 - Paid Rent for it's offices and Warehouse in Birmingham. Monthly Rent is £12,000 + VAT

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

3 On 03/11/2021 - Purchased 12,000 plasterboards for £6 + VAT each - Payment terms 30 days from the invoice date

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

4 On 04/11/2021 - Paid £10,000 for a 1-year building insurance

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

5 On 11/11/2021 - Sold 10,000 plasterboards for £9.00 + VAT each. Payment terms 30 days from the invoice date

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
DR
CR
CR
CR

6 On 12/11/2021 - Paid for the 10,000 plasterboards purchased in October

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

 DR
DR
CR
CR

7 On 12/11/2021 - Received the full amount from ABC for the stock sold in October

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

8 On 31/11/2021 - Paid the bookkeeping company for the month of November

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
DR
CR
CR

End-of-month Closing Entries (30/11/2021)

DEBIT CREDIT DEBIT ACCOUNT CREDIT ACCOUNT

DR
CR
DR
CR
DR
CR
DR
CR
DR
CR
 DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

the invoice date

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

ys from the invoice date

 DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

monthly charge of £500+VAT per month. They paid for October's service on 31/10/2021

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

 DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

m the invoice date

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

e invoice date

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

DEBIT (£) CREDIT (£)

Nominal
Account TB October TB November
Code
001 Bank
050 Stock (Plasterboards)
060 Accounts Receivable (Debtors)
080 Prepaid Expense
100 Patent
101 Accumulated Amortisation
102 Fixed Assets
103 Accumulated Deprecaiation
300 Accounts Payable (Creditors)
350 VAT
400 Ordinary Shares
500 Sales (Turnover)
600 Cost of Sales (COGS)
700 Subscription Expense
701 Accounting Expense
702 Marketing Expense
703 Insurance Expense
704 Rent Expense
800 Depreciation Expense
801 Amortisation Expense
 Profit & Loss
October 2021 November 2021
Sales
COGS

Gross Profit

General & Administrative Expenses

Operating Profit (EBITDA)

Depreciation & Amortisation

Earning Before Interest & Tax (EBIT)

Interest Expense

Earnings Before Tax

 Balance Sheet
October 2021 November 2021
Current Assets

Non-Current Assets

Short-term Liabilities

Long-term Liabilities

Shareholders' Equity