The following trial balance has been extracted from the ledger of Mr You, a sole trader.
| ACCOUNT | DEBIT | CREDIT |
| SALES | 150,000 | |
| PURCHASES | 97,500 | |
| CARRIAGE | 2,800 | |
| DRAWINGS | 201 | |
| RENT AND INSURANCE | 13,560 | |
| POSTAGE AND STATIONERY | 2,700 | |
| ADVERTISING | 1,600 | |
| SALARIES AND WAGES | 5,160 | |
| IRRECOVERABLE DEBTS | 402 | |
| ALLOWANCE FOR RECEIVABLES | 448 | |
| RECEIVABLES | 36,000 | |
| PAYABLES | 32,400 | |
| CASH ON HAND | 184 | |
| CASH AT BANK | 696 | |
| INVENTORY AS AT 1 JUNE 20X5 | 980 | |
| EQUIPMENT AT COST | 80,000 | |
| ACCUMULATED DEPRECIATION | 16,000 | |
| CAPITAL | 42,935 | |
| 241,783 | 241,783 |
The following additional information as at 31 May 20X6 is available.
1. Rent is accrued by $1,500.
2. Insurance has been prepaid by $3,960.
3. Closing inventory has been counted and is valued at $1,176.
4. $560 of carriage represents carriage inwards on purchases.
5. The allowance for receivables is to be increased by $46.
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 $1,500.
Debit Rent and insurance expenses and Credit Accrual $1,500.
2. Insurance has been prepaid by $3,960.
Debit Prepayment and Credit Rent and insurance expenses $3,960
3. Closing inventory has been counted and is valued at $1,176.
Debit Financial position Inventory and credit profit and loss Inventory $1,176.
4. $560 of carriage represents carriage inwards on purchases.
Debit Purchase and Credit Carriage $560.
5. The allowance for receivables is to be increased by $46.
Debit irrecoverable debt and Credit Allowance for receivables $46
6. Equipment is to be depreciated at 15% per annum using the straight-line method.
Debit depreciation and Credit Accumulated depreciation $12,000SUGGESTED SOLUTIONS
Income statement
| ACCOUNT | WORKING | DEBIT | CREDIT |
| REVENUE | 150,000 | ||
| INVENTORY OB | 980 | ||
| PURCHASE | 97500 + 560 | 98,060 | |
| LESS INVENTORY CB | 1,176 | ||
| COST OF SALES | 97,864 | ||
| GROSS PROFIT | 52,136 | ||
| CARRIAGE | 2800-560 | 2,240 | |
| RENT AND INSURANCE | 13560 +1500 -3960 | 11,100 | |
| POSTAGE AND STATIONERY | 2,700 | ||
| ADVERTISING | 1,600 | ||
| SALARIES AND WAGES | 5,160 | ||
| IRRECOVERABLE DEBTS | 402+46 | 448 | |
| DEPRECIATION EXPENSES | 12000 | 12,000 | |
| TOTAL EXPENSES | 35,248 | ||
| PROFIT | 16,888 |
Financial position
| ACCOUNT | WORKING | DEBIT | CREDIT |
| NON CURRENT ASSETS | 80,000 | ||
| LESS ACC DEP EQUIPMENT | 16000 + 12000 | (28,000) | |
| TOTAL NON CURRENT ASSETS | 52,000 | ||
| CURRENT ASSETS | |||
| INVENTORY | 1,176 | ||
| RECEIVABLES | 36,000 | ||
| less allowance for receivables | (494) | ||
| lreceivables | 35,506 | ||
| PREPAYMENT | 3,960 | ||
| BANK | 696 | ||
| CASH | 184 | ||
| TOTAL CURRENT ASSETS | 41,522 | ||
| TOTAL ASSETS | 93,522 | ||
| ACCOUNT | WORKING | DEBIT | CREDIT |
| PAYABLES | 32,400 | ||
| ACCRUAL | 1,500 | ||
| TOTAL CURRENT LIABILITY | 33,900 | ||
| Capital | 42,935 | ||
| Profit | 16,888 | ||
| DRAWING | 201 | ||
| TOTAL EQUITY | 59,622 | ||
| TOTAL LIABILITIES & EQUITY | 93,522 |
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2015 ACCA F3 Trading Account