Boume is a carpet retail business. The accountant of Boume has completed both a trail balance at 28 February 2021 and the records for the last months of the business year ending 31 March 2021.

ASSIGNMENT REQUIREMENTS

Boume is a carpet retail business. The accountant of Boume has completed both a trail balance at 28 February 2021 and the records for the last months of the business year ending 31 March 2021. These records and reports are shown below.

The owner does not understand the material and has approached you for advice.

1) The owner would like to know what events occurred in the month of March 2021 and has asked you to produce a short explanation of each event that occurred. (20 marks)

2) It has because clear that several events on the last day of March were, by mistake, not recorded by the accountant. These events were:

• A credit sale, invoice 0040, to Cold for €4,500
• A cash sale of wool carpet for €600.
• A credit purchase of carpet from Morn for €1,800, purchase invoice 08819
• A return of goods bought from Night for €1,400, credit note C48
• A receipt from customer warm for €3,100
• A payment to supplier Night for €870
• The purchase of equipment for €11,000 cash

Add the above event to the records for March, updating as necessary the day books, ledger accounts, trial balance and financial reports. (60 marks)

The owner has been told that the annual reports for the business should be prudent but is not clear what this means. Explain this concept to the owner. Support your explanation with 3 examples of the principle of prudence being used from within the material supplied by the accountant for Boume. (20 marks)