Frank Wood's Business Accounting 1 (v. 1), 10th Edition

TENTH EDITION Every year, thousands of students rely on Frank Wood's best-selling books to help them - pdf free download

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Every year, thousands of students rely on Frank Wood's best-selling books to help them pass their accountancy exams.

Business Accounting Volume 1 is used on a wide variety of courses in accounting and business, both at secondary and tertiary level and for those studying for professional qualifications.

'A classic textbook that has set thousands of students on a straight path since it was first published, Wood & Sangster's Business Accounting can be recommended without reservation to all accounting students.' Dr George Iatridis, University of Athens, Greece and University of Manchester

'I highly recommend Business Accounting because it is clear and to the point, which makes it easy for students to understand. This is especially true for students who want to study accounting for the first time or have little knowledge of the accounting subject.' Caroline Teh, Inti College, Malaysia.


➤ Over 120 brand new review questions for exam practice ➤ Coverage of International Accounting Standards 2005 ➤ Additional and updated worked examples for areas of difficulty ➤ Treatment of VAT for companies operating within the United Kingdom ➤ Expanded introduction to the language and history of accounting

business accounting 1

New to this edition:

Features: ➤ Easy-to-follow explanations of contemporary accounting practice, including double entry bookkeeping and the preparation of financial statements ➤ Clear and logical progression through topics ➤ Activities designed to reinforce your understanding of key concepts ➤ Over 300 review questions, including past Examination Board questions ➤ 100 multiple choice questions with answers ➤ Regularly updated Companion Website including further self-test questions and accounting standards updates


Business Accounting Volume 1 is the world’s bestselling textbook on bookkeeping and accounting. Now in its tenth edition, it has become the standard introductory text for accounting students and professionals alike.



business accounting TENTH EDITION


An imprint of

Additional student support at

Additional student support at

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business accounting 1 Visit the Business Accounting, tenth edition Companion Website at to find valuable student learning material including: l l l l l l

Learning objectives for each chapter Multiple choice questions to help test your learning Review questions and answers Links to relevant sites on the web Searchable online glossary Flashcards to test your knowledge of key terms and definitions

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Frank Wood 1926–2000

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business accounting TENTH EDITION

FRANK WOOD BSc (Econ), FCA and


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Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE and Associated Companies throughout the world. Visit us on the World Wide Web at

First edition published in 1967 Second edition published under the Longman imprint in 1972 Third edition published in 1979 Fourth edition published in 1984 Fifth edition published in 1989 Sixth edition published in 1993 Seventh edition published in 1996 Eighth edition published under the Financial Times Pitman Publishing imprint in 1999 Ninth edition published in 2002 Tenth edition published 2005 © Frank Wood 1967 © Longman Group UK Limited 1972, 1979, 1984, 1989, 1993 © Pearson Professional Limited 1996 © Financial Times Professional Limited 1999 © Pearson Education Limited 2002, 2005 The rights of Frank Wood and Alan Sangster to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP. ISBN 0 273 68149 4 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress 10 9 8 7 6 5 4 3 2 1 08 07 06 05 Typeset in 9.5/11.5 pt Sabon by 35. Printed and bound in China. SWTC /01

Also available: Frank Wood’s Business Accounting Vol 2 – 0273 693107 Book-keeping & Accounts – 0273 685481 Frank Wood’s A-level Accounting – 0273 685325

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Contents Notes for teachers and lecturers Notes for students

part 1

Introduction to double entry bookkeeping

1 2 3 4

The accounting equation and the balance sheet The double entry system for assets, liabilities and capital The asset of stock The effect of profit or loss on capital and the double entry system for expenses and revenues 5 Balancing off accounts 6 The trial balance

part 2

11 12 13 14 15 16 17 18 19 20 21 22 23

3 18 28 38 49 57

The financial statements of sole traders

7 Trading and profit and loss accounts: an introduction 8 Balance sheets 9 Trading and profit and loss accounts and balance sheets: further considerations 10 Accounting concepts

part 3

xiii xv

71 83 91 104

Books of original entry

Books of original entry and ledgers The banking system in the UK Cash books The sales day book and the sales ledger The purchases day book and the purchases ledger The returns day books The journal The analytical petty cash book and the imprest system Value added tax Columnar day books Employees’ pay Computers and accounting Computerised accounting systems

119 125 136 153 162 168 180 191 200 218 226 234 244

part 4 Adjustments for financial statements 24 Capital expenditure and revenue expenditure

259 v

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25 Bad debts, provisions for doubtful debts, and provisions for discounts on debtors 26 Depreciation of fixed assets: nature and calculations 27 Double entry records for depreciation 28 Accruals and prepayments and other adjustments for financial statements 29 The valuation of stock 30 Bank reconciliation statements 31 Control accounts 32 Errors not affecting trial balance agreement 33 Suspense accounts and errors Scenario questions

part 5 34 35 36 37 38 39 40

41 42 43 44 45 46


515 533 548 556 576 608

An introduction to financial analysis

47 An introduction to the analysis and interpretation of accounting statements

part 8

411 423 443 457 480 488 505

Partnership accounts and company accounts

Partnership accounts: an introduction Goodwill for sole traders and partnerships Revaluation of partnership assets Partnership dissolution An introduction to the financial statements of limited liability companies Purchase of existing partnership and sole traders’ businesses

part 7

315 336 351 364 378 386 404

Special accounting procedures

Introduction to accounting ratios Single entry and incomplete records Receipts and payments accounts and income and expenditure accounts Manufacturing accounts Departmental accounts Cash flow statements Joint venture accounts

part 6

269 284 294


An introduction to management accounting

48 An introduction to management accounting


Appendices 1 Answers to review questions 2 Answers to multiple choice questions 3 Glossary

667 741 742



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Supporting resources Visit to find valuable online resources Companion Website for students l

Learning objectives for each chapter


Multiple choice questions to help test your learning


Review questions and answers


Links to relevant sites on the web


Searchable online glossary


Flashcards to test your knowledge of key terms and definitions

For instructors l

Complete, downloadable Solutions Manual


PowerPoint slides that can be downloaded and used as OHTs

Also: The Companion Website provides the following features: l

Search tool to help locate specific items of content


E-mail results and profile tools to send results of quizzes to instructors


Online help and support to assist with website usage and troubleshooting

For more information please contact your local Pearson Education sales representative or visit

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Guided tour of the book Part opening






Balancing off accounts

Learning objectives After you have studied this chapter, you should be able to: l

close accounts when appropriate


balance off accounts at the end of a period and bring down the opening balance to the next period


distinguish between a debit balance and a credit balance


describe and prepare accounts in three-column format

Introduction In this chapter, you’ll learn how to discover what the amount outstanding on an account is at a particular point in time. You’ll also learn how to close accounts that are no longer needed and how to record appropriate entries in accounts at the end and beginning of periods. Finally, you’ll learn that T-accounts are not the only way to record accounting transactions.


Learning objectives outline what you will need to have learned by the end of the chapter.

Accounts for debtors

Introduction Where debtors have paid their accounts

This part is concerned with preparing, from double entry records, the financial statements of sole traders. 7 8 9 10

So far you have learnt how to record transactions in the accounting books by means of debit and credit entries. At the end of each accounting period the figures in each account ar...

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