Question 2 is based on B124 Book 2, Chapters 1, 2 (2.2) and 3 (3.1 to 3.5). (Completing Activity 1.2 in Chapter 1 of Book 2 would be excellent preparation for part (a). Completing Activities 3.2–3.4 in Chapter 3 of Book 2 would be very good preparation fo

Certainly! Below is the step-by-step breakdown of the accounting transactions for both Week 1 (part a) and Week 2 (part b) with their effects on the accounting equation. ### Part (a): Summary Effects of Transactions for Week 1 | Date | Description | Assets (£) | Capital (£) | Liabilities (£) | |-------------|----------------------------------------------|-------------|--------------|-----------------| | 1 April | Investment by Sophia | +10,000 | +10,000 | 0 | | 2 April | Purchase of equipment | -4,000 | | | | 3 April | Purchase of jumpers (supplies) | -2,500 | | | | 3 April | Purchase of sewing machine | -1,000 | | | | 6 April | Purchase of fabric on credit | +1,500 | | +1,500 | | 7 April | Withdrawal for personal expense | -100 | | | | **Summary Total** | **Total Assets** | **£4,900** | **£10,000** | **£1,500** | ### Explanation for Week 1 - Total Assets = Cash in the bank after all transactions is £10,000 - £4,000 (equipment) - £2,500 (supplies) - £1,000 (sewing machine) - £100 (withdrawal) + £1,500 (credit purchase of fabric) = £4,900. - Total Capital = Initial investment of £10,000. - Total Liabilities = £1,500 (this is the amount owed for the fabric purchased on credit). --- ### Part (b): Summary Effects of Transactions for Week 2 #### Starting Balance (from Week 1): | Assets (£) | Capital (£) | Liabilities (£) | |------------|--------------|-----------------| | 4,900 | 10,000 | 1,500 | ### Week 2 Transactions | Date | Description | Assets (£) | Capital (£) | Liabilities (£) | |-------------|--------------------------------------------------|-------------|--------------|-----------------| | 8 April | Paid half of payables (credit fabric purchased) | -750 | | -750 | | 11 April | Paid rent | -1,000 | - | | | 11 April | Paid insurance | -200 | - | | | 14 April | Sales (received cash for 50% and credit for 50%)| +6,000 | +6,000 | | | 14 April | Cost of Sales (half of inventory sold) | -1,250 | - | | | **Summary Total** | **Total Assets** | **£7,700** | **£15,000** | **£750** | ### Explanation for Week 2 - **Assets Calculation**: - Beginning Assets = 4,900 - Cash decreased by £750 for a payables payment, £1,000 for rent, and £200 for insurance: 4,900 - 750 - 1,000 - 200 = 3,950 - Cash increased by £6,000 from sales: 3,950 + 6,000 = 9,950 - Cost of goods sold (inventory, costing £2,500) affects the inventory amount: 9,950 - 1,250 (50% of £2,500) = 8,700 - **Capital Calculation**: - Increased due to sales income: 10,000 + 6,000 = 16,000 - Reduced by expenses (rent and insurance): 16,000 - 1,000 - 200 = 14,800 - Also consider the need to offset the cost of sales: 14,800 - 1,250 = 13,550 - **Liabilities Calculation**: - Beginning Liabilities = 1,500 - The liability decreased from paying off half of the payables: 1,500 - 750 = 750 - It remains unchanged otherwise. Please revise any specifics if required, you may need to adapt numbers based on your interpretation, regulations, or existing balances.