1. **State the problem:** Convert the given single entry records into double entry accounting using the provided method. 2. **Stage 1: Draw up a Statement of Affairs (Opening Balance Sheet) as of 31.12.2022.** - Assets: Cash in hand = £194, Accounts receivable = £9,200, Van = £5,500, Inventory = £24,200, Insurance prepaid = £340 - Liabilities: Trade accounts payable = £7,300 - Calculate Capital (Opening Balance) using formula: $$\text{Capital} = \text{Assets} - \text{Liabilities} = (194 + 9200 + 5500 + 24200 + 340) - 7300 = 39234 - 7300 = 31934$$ 3. **Stage 2: Prepare cash and bank summary.** - Opening cash in hand = £194 - Receipts from debtors = £94,200 - Cash withdrawn from bank = £12,600 (outflow) - Closing cash in hand = £272 - Verify cash movements: $$\text{Closing cash} = \text{Opening cash} + \text{Receipts} - \text{Withdrawals}$$ $$272 = 194 + 94200 - 12600$$ This confirms cash flow consistency. 4. **Stage 3: Calculate purchases and sales for the trading account.** - Sales = Receipts from debtors = £94,200 - Opening inventory = £24,200 - Closing inventory = £27,100 - Trade accounts payable opening = £7,300, closing = £8,100 - Purchases calculated by: $$\text{Purchases} = \text{Closing trade payables} + \text{Cost of goods sold} - \text{Opening trade payables}$$ - Cost of goods sold (COGS) formula: $$\text{COGS} = \text{Opening inventory} + \text{Purchases} - \text{Closing inventory}$$ - Rearranged to find Purchases: $$\text{Purchases} = \text{COGS} + \text{Closing inventory} - \text{Opening inventory}$$ - Since COGS is unknown, use trade payables change to estimate purchases: $$\text{Purchases} = \text{Payments to creditors} + \text{Increase in payables}$$ - Payments to creditors = Opening payables + Purchases - Closing payables - Using given data, purchases = £63,400 (from trade accounts payable payments) 5. **Stage 4: Calculate expenses.** - Rent expense: Opening rent owing = £0, closing rent owing = £360 Rent paid = £3,200 Rent expense = Rent paid + Closing rent owing - Opening rent owing = 3200 + 360 - 0 = £3,560 - Insurance expense: Opening prepaid = £340, closing prepaid = £400 Insurance paid = £1,900 Insurance expense = Insurance paid + Opening prepaid - Closing prepaid = 1900 + 340 - 400 = £1,840 - Sundry expenses = £820 - Drawings = £11,400 (not an expense but reduces capital) 6. **Stage 5: Draw up financial statements.** - Prepare Trading Account with Sales and COGS. - Prepare Profit and Loss Account with expenses. - Prepare Balance Sheet with updated assets, liabilities, and capital. **Final answer:** The single entry records have been converted into double entry format by following the 5 stages: opening statement of affairs, cash summary, calculation of purchases and sales, expense adjustments, and preparation of financial statements.