Answer to Question #270982 in Accounting for Mnyabe

Question

On 15 May 20X7, Blake pays a cheque for £3,000 to D Smith in part payment of the amount owing. The asset of cash at bank is therefore reduced, and the liability to the creditor is also reduced. The balance sheet is now:

 B Blake

Balance Sheet as at 15 May 20X7

Shop

Stock of goods Debtor

Cash at bank

Less: Creditor

Capital

 Assets

£ 32,000 6,000 600 25,400 64,000

( 4,000) 60,000

60,000

   Note how the total of each part of the balance sheet has not changed. The business is still worth £60,000 to the owner.

Answer 1

Collection of an asset

J Brown, who owed Blake £600, makes a part payment of £200 by cheque on 31 May 20X7. The effect is to reduce one asset, debtor, and to increase another asset, cash at bank. The balance sheet becomes:

B Blake Balance Sheet as at 31 May 20X7

Assets

Shop 32,000 Stock of goods

6,000 Debtor

400 Cash at bank

Less: Creditor ( 4,000)

Capital 60,000