Case brief
Your brief
Rookhaven Plumbing & Heating Ltd installs and services boilers and plumbing for schools, landlords and businesses. It runs two vans, employs four plumbers and is owned and managed by Callum Reid.
Dana Marsh, the company's part-time bookkeeper, posted September's transactions and then left for a new job at the end of the month. Her draft trial balance — typed into a spreadsheet from the ledger — doesn't balance, and Callum has a meeting with the bank on Friday.
Callum went through the September figures and listed what looks wrong to him. Your job: explain why the spreadsheet doesn't balance, investigate each of Callum's review points using the source documents, correct the ledger, post the month-end adjustments and restate September's profit.
Dana's entries are already in the journal (shaded). They can't be edited: correct a mistake either with a correcting entry for the difference, or by reversing Dana's entry and posting the right one.
What you'll practise
- Explain a trial balance difference: casting errors and transpositions (a difference divisible by 9).
- Recognise errors a balanced trial balance can't reveal: principle, commission, omission, reversal, duplication and wrong amounts on both sides.
- Correct errors with a single correcting entry or by reversing and re-posting.
- Post month-end adjustments and restate profit with a schedule of corrections.
16 entries were already posted by Dana Marsh (previous bookkeeper) before you arrived. They're in the journal and ledger. Review them: some may be wrong. Correct a mistake with a correcting entry, or reverse the wrong entry (recording the reversal against the correction it belongs to) and post the right one.
Accounting policies
- Capital items
- Tools and equipment costing 1,000 or more with a useful life of more than one year are capitalised in Vehicles and equipment and depreciated straight-line with no residual value, starting the month after purchase (a house convention for simplicity; the difference from starting when an item is first available for use is immaterial). Accessories bought with an item that it can't work without are part of its cost. Smaller stand-alone items and repairs are expensed.
- Insurance
- Premiums are paid in advance. The part of a premium that covers future months is a prepayment, expensed month by month over the period of cover.
- Correcting entries
- Date correcting entries 30 September (the date of your review) and record each one against the review point it answers (COR-1 to COR-7). Either post one entry for the difference, or reverse Dana's entry and post the right one. A transaction that was never recorded is recorded on its own document date, against its review point.
- Materials
- Materials are bought for specific jobs and expensed to Materials and parts when the supplier's invoice is received. Rookhaven holds no stock.
- Simplifications
- Sales tax and payroll taxes are left out of this case. The director's loan is interest-free.
People
- Callum Reid — Managing director — your manager
- Dana Marsh — Previous bookkeeper (left 30 September)
- Thistledown Property Management, Wexcombe Dental Practice, Linnet Court Residents' Association, Elmstead Primary School — Customers
- Brennan Trade Supplies, Tolland Tool Sales, Larchmere Cleaning Services, Northway Fuel Cards — Suppliers
Opening balances, 1 Sept 2026
| Date | Account | Debit | Credit |
|---|---|---|---|
| 1000Cash at bank | 28,600.00 | ||
| 1100Accounts receivable | 18,250.00 | ||
| 1300Prepaid insurance | 300.00 | ||
| 1500Vehicles and equipment | 60,000.00 | ||
| 1510Accumulated depreciation | 18,000.00 | ||
| 2000Accounts payable | 9,850.00 | ||
| 2500Director's loan | 30,000.00 | ||
| 3000Share capital | 10,000.00 | ||
| 3100Retained earnings | 39,300.00 | ||
| Opening balances brought forward | |||
Chart of accounts
| Code | Account | Type | Normal |
|---|---|---|---|
| 1000 | Cash at bank | Current asset | debit |
| 1100 | Accounts receivableCustomers owe on 30-day terms. | Current asset | debit |
| 1300 | Prepaid insuranceInsurance paid for cover not yet used. | Current asset | debit |
| 1500 | Vehicles and equipmentTwo vans and major tools, at cost. | Non-current asset | debit |
| 1510 | Accumulated depreciation | Contra asset (non-current) | credit |
| 2000 | Accounts payableAmounts owed to suppliers (control account). | Current liability | credit |
| 2100 | Accrued expensesCosts incurred, not yet invoiced. | Current liability | credit |
| 2500 | Director's loanInterest-free loan from Callum Reid, repayable in 2029. | Non-current liability | credit |
| 3000 | Share capital | Share capital | credit |
| 3100 | Retained earnings | Retained earnings | credit |
| 4000 | Service revenueInstallation, repair and servicing work invoiced to customers. | Revenue | credit |
| 5000 | Materials and partsPipe, fittings, valves and boiler parts used on jobs (bought for each job and expensed). | Cost of sales | debit |
| 6000 | Wages | Operating expense | debit |
| 6100 | Rent expense | Operating expense | debit |
| 6200 | Vehicle running costsFuel, tolls and van servicing. | Operating expense | debit |
| 6300 | Repairs and maintenanceRepairs to the company's own premises, vans and tools. | Operating expense | debit |
| 6400 | Insurance expense | Operating expense | debit |
| 6500 | Depreciation expense | Operating expense | debit |
| 6700 | Office and cleaning | Operating expense | debit |
| 7100 | Bank charges | Operating expense | debit |