Prepare a cash book, showing how the transactions that took place in the year should be accounted. Prepare a trial balance as at 31 December 2017.

To prepare the cash book and trial balance, we need to account for the transactions provided.

(a) Cash Book Preparation

Cash Receipts:

• Cash sales: K'000 700
• Receipts from receivables: K'000 1,700

Cash Payments:

• Payments to suppliers: K'000 800
• Salaries: K'000 280
• Administration expenses: K'000 300
• Distribution costs: K'000 170
• Loan repayment: K'000 200

Cash Book:

$$\begin{array}{|c|c|c|} \hline \text{Date} & \text{Details} & \text{Amount (K'000)} \\ \hline \text{Receipts} & \text{Cash sales} & 700 \\ & \text{Receipts from receivables} & 1,700 \\ \hline \text{Payments} & \text{Payments to suppliers} & 800 \\ & \text{Salaries} & 280 \\ & \text{Administration expenses} & 300 \\ & \text{Distribution costs} & 170 \\ & \text{Loan repayment} & 200 \\ \hline \end{array}$$

Net Cash Flow:

$$\text{Total Receipts} = 700 + 1,700 = 2,400$$ $$\text{Total Payments} = 800 + 280 + 300 + 170 + 200 = 1,750$$ $$\text{Net Cash Flow} = 2,400 - 1,750 = 650$$

(b) Trial Balance as at 31 December 2017

Assets:

• Non-current assets: K'000 1,460
• Current assets (adjusted for transactions):
  • Inventories: K'000 250
  • Receivables (after receipts): K'000 370 - 1,700 = (1,330)
  • Prepayment: K'000 20
  • Bank (adjusted for net cash flow): K'000 130 + 650 = 780

Liabilities:

• Non-current liabilities (Loan): K'000 600
• Current liabilities:
  • Payables: K'000 490
  • Accruals: K'000 120

Capital and Reserves:

• Capital: K'000 900
• Profit: K'000 270
• Drawings: K'000 (150)

Trial Balance:

$$\begin{array}{|c|c|c|} \hline \text{Account} & \text{Debit (K'000)} & \text{Credit (K'000)} \\ \hline \text{Non-current assets} & 1,460 & \\ \text{Inventories} & 250 & \\ \text{Receivables} & & 1,330 \\ \text{Prepayment} & 20 & \\ \text{Bank} & 780 & \\ \text{Loan} & & 600 \\ \text{Payables} & & 490 \\ \text{Accruals} & & 120 \\ \text{Capital} & & 900 \\ \text{Profit} & & 270 \\ \text{Drawings} & 150 & \\ \hline \text{Total} & 2,660 & 3,710 \\ \hline \end{array}$$

The trial balance should balance, so double-check calculations and ensure all transactions are correctly accounted for.