Case brief
Your brief
Pennywort Design Studio is a one-person graphic-design business owned by Nadia Ferro. It designs logos, packaging, leaflets and website graphics for small local businesses, working from a rented studio.
Nadia registered the studio at the end of May and opened its business bank account with 1,000 of her own money. That is the only balance brought forward. June is the studio's first month of trading.
You are the studio's new part-time bookkeeper. Nadia has dropped June's paperwork into your inbox. Record everything that is a transaction, reconcile the bank account at 30 June, and answer her questions about the month.
New to this? Take the documents one at a time and ask three questions. Did something the studio owns, owes or is owed change — or did it earn income or use up a cost? If not, there's nothing to record. If so, which two accounts change, and which goes up? And on what date did it happen? Every entry has at least one debit and one credit, and they're always equal.
What you'll practise
- Read each source document and decide whether it is a transaction.
- Record owner's capital, credit purchases, expenses, client invoices, receipts and payments.
- Keep the owner's money and the business's money apart: capital and drawings.
- Reconcile the bank statement and record a bank-only item.
- Explain why profit and cash are different.
Accounting policies
- Accrual basis
- Income is recorded when the work is done and invoiced, and expenses when the cost is incurred — not when cash moves. A bill received but not yet paid is recorded in Accounts payable.
- Owner's money
- Money Nadia puts into the studio is Owner's capital. Money she takes out for personal use is recorded in Owner's drawings. Neither is income or an expense of the studio.
- Supplies
- Paper, ink, sketchbooks and similar consumables are used up within weeks, so they are expensed when bought.
- Dates
- Date each entry on the date of the transaction shown on its document (the payment date for payments, the invoice date for bills and invoices).
- Simplifications
- Sales tax and income tax are left out of this case. Nadia is not registered for sales tax.
People
- Nadia Ferro — Owner and designer
- Hollyhock Bakery, Calloway Physio — Clients
- Paperworks Supply Co., Skyline Telecom — Suppliers
- Mosswood Yard Studios — Landlord
Opening balances, 1 Jun 2026
| Date | Account | Debit | Credit |
|---|---|---|---|
| 1000Cash at bank | 1,000.00 | ||
| 3000Owner's capital | 1,000.00 | ||
| Opening balances brought forward | |||
Chart of accounts
| Code | Account | Type | Normal |
|---|---|---|---|
| 1000 | Cash at bankThe studio's business current account. | Current asset | debit |
| 1100 | Accounts receivableAmounts clients owe for work invoiced but not yet paid. | Current asset | debit |
| 1500 | EquipmentComputers and other items used for more than a year. | Non-current asset | debit |
| 2000 | Accounts payableAmounts owed to suppliers for bills received but not yet paid. | Current liability | credit |
| 3000 | Owner's capitalMoney and other resources the owner has put into the business. | Share capital | credit |
| 3100 | Retained profitsProfits kept in the business from earlier periods. | Retained earnings | credit |
| 3200 | Owner's drawingsMoney the owner takes out of the business for personal use. | Dividends / drawings | debit |
| 4000 | Design feesFees earned for design work. | Revenue | credit |
| 6000 | Rent expense | Operating expense | debit |
| 6100 | Studio supplies expensePaper, ink, sketchbooks and other consumables. | Operating expense | debit |
| 6200 | Phone and internet | Operating expense | debit |
| 6300 | Bank charges | Operating expense | debit |
| 6400 | Advertising expense | Operating expense | debit |
| 6500 | Software subscriptions | Operating expense | debit |