Question

Aire Co produced the following list of balances after its first month of trading. £ 1. Cash 16,990 2. Inventories 34,152 3. Rent payable 10,878 4. Cost of sales 79,460 5. Trade payables 21,695 6. Borrowings 18,246 7. Office equipment 40,806 8. Salaries and wages 42,881 9. Trade receivables 17,013 10. Equity ? 11. Sales revenue 122,266 12. Heat and light 2,297 13 Insurance 1,411 Prepare a trial balance at the end of the month by filling out the table below and calculate the equity of the business at the end of the period.

Answer 1

To prepare a trial balance, list the accounts and their respective balances. Equity is the residual interest in the assets of the entity after deducting liabilities. Calculate equity by subtracting total liabilities from total assets.

Account Title Debit (£) Credit (£)
Cash 16,990 -

Inventories 34,152 -

Rent payable - 10,878

Cost of sales 79,460 -

Trade payables - 21,695

Borrowings - 18,246

Office equipment 40,806 -

Salaries and wages42,881 -

Trade receivables - 17,013

Equity - ?

Sales revenue - 122,266

Heat and light 2,297 -

Insurance 1,411 -

Total 258,284 258,284

Let's calculate the equity at the end of the period:

Equity = Assets - Liabilities

Equity = (16,990 + 34,152 + 79,460 + 40,806 + 42,881 + 122,266) - (10,878 + 21,695 + 18,246 + 17,013)

Equity = 336,555 - 67,832

Equity = 268,723

Therefore, the equity of the business at the end of the period is £268,723.