Clive’s Crafty Supplies


                              FUNDAMENTALS OF FINANCIAL REPORTING




The following assignment contains two elements which are required to be completed on an individual basis and should be handed in together, in a typed format.


Part A       (Assessment weighting – 50%)


For a number of years Clive has pursued a hobby of wood turning and wood craft. He has recently attended a very successful craft fair and has finally decided that there is an untapped market in the area. Therefore, Clive has just started business as a retailer of locally produced hand-made craft products, operating out of a small cottage shop in a lively village within easy travelling of several reasonable sized towns. Clive sells to both private customers and to trade customers who have made agreements to buy on credit, settling their accounts when they have sold their stock on, or after two months of purchase, whichever is the sooner. You have just completed a course on financial accounting and have offered to set up the accounting records for Clive and show him how to produce financial summaries for his business in the future. Clive has given you the details relating to his transactions for the month of August and has asked you to prepare a set of accounts, which he can continue to use as his business becomes established.


The minimum information he will require (in double entry format – so that he will be able to continue to use the accounts in future months as his business grows) will be:


~        Debtors ledger accounts

~        Creditors ledger accounts

~        Nominal ledger accounts.


Clive has also asked you to prepare an Income Statement and a Balance Sheet for the month of August. To do this you will need to balance the accounts and prepare a trial balance before and after any period end adjustments


Thus, you will also need to prepare, in the normally accepted formats:


~        Trial Balance:

#   before period end adjustments

#   after period end adjustments


~        Financial statements for the month ending 31st August 2009

( i.e. an Income Statement  and a Balance Sheet)


PART   B        (Assessment weighting – 50%)

Report covering:


(i)  (30% weighting)         

Clive has also asked you to investigate the use of a computer package to maintain his accounts. As you have access to the Sage Accounting package, you have agreed to prepare a report comparing the computer accounting package with the manually prepared accounts you have recently completed for Clive.


You should use the Sage workbook to help you to become familiar with the accounting package, which is available on the university computer system. This will allow you to make comparisons with the manual accounts you have prepared. This should include taking reports from the computer accounts to compare them with the manually produced accounts and statements for Clive’s business. You are not required to prepare Clive’s accounts using the Sage Accounting package.


Multiple copies of the Sage tutorial workbook are available from the library on short loan. You will need a password for access to the package, which you will be able to obtain from the unit leader. You need to familiarise yourself with the package, and some tutorial time will be allocated to support this. However, THE ONUS IS ON YOU to learn the package before attempting this part of the assignment.


Your report should include print outs of examples of a variety of the Sage accounts for comparison with those prepared for Clive’s business (which should also include the Income Statement and Balance Sheet) prepared after you have completed the entries from the Sage workbook. Suggested reasons why, if you feel it appropriate, Clive should adopt an accounting package such as Sage to record and process his business transactions are required. In particular, Clive is intending to offer credit payment facilities to his regular customers and he is concerned about the possibility of customers not paying. Your report should outline how bad and doubtful debts should be dealt with and how the two systems (manual and Sage) may differ in the treatment of this problem.


(You should be aware that the accounting package operates in the same way as a real accounting system for a company and may well be used by other people at the same time. Thus your entries may not be the only ones put onto the system at that time.)



(ii) (20% weighting)

In addition, your report should include some comments on the results and performance of Clive’s business for the month of August. You should identify any areas of the business which may be a problem or which may be performing well and suggest how Clive might use this information to the benefit his business.


ASSIGNMENT HAND IN DATE   …   W/c 8/3/2010   (week 21)

ANTICIPATED RETURN DATE   …   W/c 26/5/2010    (week 25)


Both parts (a) & (b) must be handed in on the above date. You are reminded of the regulations with regard to the late submission or non-submission of assignments, which are clearly stated in your handbooks, as are the regulations regarding collusion which are also attached to the front of this assignment.


Clive’s transactions for the month of August 2009.

(Business commenced on 1st August)


1st August    Commenced business by introducing the following:


ASSETS  : Premises £280,000; Van £6,300; Fixtures £8,400; Stock for resale (Inventory) £18,046; Debtors (receivables) Hanson £560; Nichols £2,520; Cash in hand £630; Bank £17,556.

LIABILITIES      Creditors (payables) Bennett £840; Ronson £2,800.


(The receivables and payables above have arisen from Clive attending a recent craft fair selling his own wood craft items and buying in stocks of specialist wood).


August  2    Paid rent to Hassle Holdings by cheque £210.

August  3    Bought stock of goods for resale, on credit, from the following craftsmen:

Bennett £ 280; Harmison £784; Gensen £380; Lazzard £966.

August  4    Sold goods on credit to the following customers:

Optix £784; Barties ltd £1,092; Simpson £1,372; Denby £672;

Garfield £1,652; Nichols £560.

August  5    Paid for service on van in cash £182.

August  8    Cash for Clive’s personal use £280.

August  9    Stock sold on credit to Barties ltd £308; Joe Penson £938.

August 11    Stock returned to Clive by Optix valued at £224 and from Simpson £252.

August 12    Purchased car for business use from Eastleigh Motors £4,200. Payment was agreed to be paid in August. Insurance on this car was taken out with an annual premium of £630 valid until 31st July 2010 being paid by cheque.

August 15    The following customers paid the amounts owing on their accounts by cheque. A cash discount of 5% was allowed as the payments were received within the first month:  Hanson; Nichols; Optix; Simpson.

August 16    Clive returned goods valued at cost price of £126 bought from Lazzard.

August 18    Bought goods on credit from: John Jessup £1,246; Better Supplies plc £1,008.

August 23    Paid the balances on the following creditors  accounts by cheque:

Bennett; Ronson; Lazzard.

August 24    Wages to part time staff paid by bank transfer £784.

August 25    Business rates £924 paid by cheque.

August 29    Settled the account with Eastleigh Motors, paying by cheque.




Other information

It was established that the payment made for the business rates covered the six month period to 31st January 2010.


Clive has decided that an appropriate policy for depreciating assets should be as follows:

Vehicles: 20% per annum on a reducing balance basis

Fixtures: 25% straight line basis


No telephone bill has been received as yet but it is expected that the usage of the phone will result in a charge of approximately £504 for the first 3 months trading.


At the end of the period the inventory remaining in the business was valued at £14,200.


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