The following trial balance has been extracted from the ledger of Mr You, a sole trader.
ACCOUNT | DEBIT | CREDIT |
SALES | 350,000 | |
PURCHASES | 227,500 | |
CARRIAGE | 5,040 | |
DRAWINGS | 335 | |
RENT AND INSURANCE | 27,120 | |
POSTAGE AND STATIONERY | 1,800 | |
ADVERTISING | 1,280 | |
SALARIES AND WAGES | 1,935 | |
IRRECOVERABLE DEBTS | 603 | |
ALLOWANCE FOR RECEIVABLES | 336 | |
RECEIVABLES | 22,500 | |
PAYABLES | 20,250 | |
CASH ON HAND | 92 | |
CASH AT BANK | 87 | |
INVENTORY AS AT 1 JUNE 20X5 | 7,840 | |
EQUIPMENT AT COST | 180,000 | |
ACCUMULATED DEPRECIATION | 36,000 | |
CAPITAL | 69,546 | |
476,132 | 476,132 |
The following additional information as at 31 May 20X6 is available.
1. Rent is accrued by $3,750.
2. Insurance has been prepaid by $3,080.
3. Closing inventory has been counted and is valued at $9,408.
4. $1,008 of carriage represents carriage inwards on purchases.
5. The allowance for receivables is to be increased by $115.
6. Equipment is to be depreciated at 15% per annum using the straight-line method.
Required
1. Prepare a statement of profit or loss for the year ended 31 May 20X6.
2. Prepare a statement of financial position as at that date.
Suggested solutions:
Working:
1. Rent is accrued by $3,750.
Debit Rent and insurance expenses and Credit Accrual $3,750.
2. Insurance has been prepaid by $3,080.
Debit Prepayment and Credit Rent and insurance expenses $3,080
3. Closing inventory has been counted and is valued at $9,408.
Debit Financial position Inventory and credit profit and loss Inventory $9,408.
4. $1,008 of carriage represents carriage inwards on purchases.
Debit Purchase and Credit Carriage $1,008.
5. The allowance for receivables is to be increased by $115.
Debit irrecoverable debt and Credit Allowance for receivables $115
6. Equipment is to be depreciated at 15% per annum using the straight-line method.
Debit depreciation and Credit Accumulated depreciation $27,000SUGGESTED SOLUTIONS
Income statement
ACCOUNT | WORKING | DEBIT | CREDIT |
REVENUE | 350,000 | ||
INVENTORY OB | 7,840 | ||
PURCHASE | 227500 + 1008 | 228,508 | |
LESS INVENTORY CB | 9,408 | ||
COST OF SALES | 226,940 | ||
GROSS PROFIT | 123,060 | ||
CARRIAGE | 5040-1008 | 4,032 | |
RENT AND INSURANCE | 27120 +3750 -3080 | 27,790 | |
POSTAGE AND STATIONERY | 1,800 | ||
ADVERTISING | 1,280 | ||
SALARIES AND WAGES | 1,935 | ||
IRRECOVERABLE DEBTS | 603+115 | 718 | |
DEPRECIATION EXPENSES | 27000 | 27,000 | |
TOTAL EXPENSES | 64,555 | ||
PROFIT | 58,505 |
Financial position
ACCOUNT | WORKING | DEBIT | CREDIT |
NON CURRENT ASSETS | 180,000 | ||
LESS ACC DEP EQUIPMENT | 36000 + 27000 | (63,000) | |
TOTAL NON CURRENT ASSETS | 117,000 | ||
CURRENT ASSETS | |||
INVENTORY | 9,408 | ||
RECEIVABLES | 22,500 | ||
less allowance for receivables | (451) | ||
lreceivables | 22,049 | ||
PREPAYMENT | 3,080 | ||
BANK | 87 | ||
CASH | 92 | ||
TOTAL CURRENT ASSETS | 34,716 | ||
TOTAL ASSETS | 151,716 | ||
ACCOUNT | WORKING | DEBIT | CREDIT |
PAYABLES | 20,250 | ||
ACCRUAL | 3,750 | ||
TOTAL CURRENT LIABILITY | 24,000 | ||
Capital | 69,546 | ||
Profit | 58,505 | ||
DRAWING | 335 | ||
TOTAL EQUITY | 127,716 | ||
TOTAL LIABILITIES & EQUITY | 151,716 |
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2015 ACCA F3 Trading Account