Marvin the magician (see Chapter 1’s case study) entered his second week of business
and was offered fees to appear as an entertainer at three events during the week.
Realising that he had no rabbits to pull out of his top hat, he contacted the United
Rabbit Corporation, which agreed, on 8 July, to supply six white rabbits at a cost of £40
each. On the same day, Amalgamated Carrots plc supplied several sacks of rabbit food
at a total cost of £250. Both companies sent Marvin invoices. Marvin built a rabbit hutch
from scrap materials at no cost.
On 10 July, Marvin travelled to William Green’s party, which was a success, and
he was paid £100 in cash for his magic act. Travel expenses cost £15 cash. On 11 July
he paid a cheque for £18 for cleaning his costume, which became dirty after handling
the rabbits. On 12 July he paid £9 for a train ticket in cash, and travelled to Violet
Cartwright’s party, which was also successful, and he received a cheque for £120. On
13 July he performed at Jasper Peter’s party which was only partly successful, since
a child felt sorry for the rabbits and let them all escape. They were never seen again.
Marvin gave an invoice to Mr and Mrs Peter for £250 for his magic act at the party.
On 14 July, he returned the unused rabbit feed to Amalgamated Carrots plc, which
gave him a refund of £60. He paid the United Rabbit Corporation invoice by cheque and
also paid Kazam Limited’s account for the playing cards bought in the first week.
Required
(a) Enter the first week’s transactions in a cash book and ledger accounts. Day books
and a petty cash book are not required. The transactions (as shown in Chapter 1’s
case study) were:
1 July Used his own funds (part of Marvin’s equity) to buy a costume £3,000
2 July Used his own funds (part of Marvin’s equity) to buy an ancient book
£2,000
3 July Bought playing cards £400, by invoice from Kazam Limited
7 July Received £750 for appearing in a magic show and opened a bank account.
Paid £20 travel expenses, using own funds (also part of Marvin’s equity)
(b) Enter the second week’s transactions (as shown above) into the cash book and
ledger accounts.
(c) Prepare a trial balance as at 14 July.
