The following trial balance has been extracted from the ledger of Mr You, a sole trader.
| ACCOUNT | DEBIT | CREDIT |
| SALES | 400,000 | |
| PURCHASES | 260,000 | |
| CARRIAGE | 4,480 | |
| DRAWINGS | 402 | |
| RENT AND INSURANCE | 40,680 | |
| POSTAGE AND STATIONERY | 3,150 | |
| ADVERTISING | 320 | |
| SALARIES AND WAGES | 3,870 | |
| IRRECOVERABLE DEBTS | 603 | |
| ALLOWANCE FOR RECEIVABLES | 280 | |
| RECEIVABLES | 18,000 | |
| PAYABLES | 16,200 | |
| CASH ON HAND | 276 | |
| CASH AT BANK | 348 | |
| INVENTORY AS AT 1 JUNE 20X5 | 4,900 | |
| EQUIPMENT AT COST | 140,000 | |
| ACCUMULATED DEPRECIATION | 28,000 | |
| CAPITAL | 32,549 | |
| 477,029 | 477,029 |
The following additional information as at 31 May 20X6 is available.
1. Rent is accrued by $1,500.
2. Insurance has been prepaid by $2,200.
3. Closing inventory has been counted and is valued at $5,880.
4. $896 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 $1,500.
Debit Rent and insurance expenses and Credit Accrual $1,500.
2. Insurance has been prepaid by $2,200.
Debit Prepayment and Credit Rent and insurance expenses $2,200
3. Closing inventory has been counted and is valued at $5,880.
Debit Financial position Inventory and credit profit and loss Inventory $5,880.
4. $896 of carriage represents carriage inwards on purchases.
Debit Purchase and Credit Carriage $896.
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 $21,000SUGGESTED SOLUTIONS
Income statement
| ACCOUNT | WORKING | DEBIT | CREDIT |
| REVENUE | 400,000 | ||
| INVENTORY OB | 4,900 | ||
| PURCHASE | 260000 + 896 | 260,896 | |
| LESS INVENTORY CB | 5,880 | ||
| COST OF SALES | 259,916 | ||
| GROSS PROFIT | 140,084 | ||
| CARRIAGE | 4480-896 | 3,584 | |
| RENT AND INSURANCE | 40680 +1500 -2200 | 39,980 | |
| POSTAGE AND STATIONERY | 3,150 | ||
| ADVERTISING | 320 | ||
| SALARIES AND WAGES | 3,870 | ||
| IRRECOVERABLE DEBTS | 603+115 | 718 | |
| DEPRECIATION EXPENSES | 21000 | 21,000 | |
| TOTAL EXPENSES | 72,622 | ||
| PROFIT | 67,462 |
Financial position
| ACCOUNT | WORKING | DEBIT | CREDIT |
| NON CURRENT ASSETS | 140,000 | ||
| LESS ACC DEP EQUIPMENT | 28000 + 21000 | (49,000) | |
| TOTAL NON CURRENT ASSETS | 91,000 | ||
| CURRENT ASSETS | |||
| INVENTORY | 5,880 | ||
| RECEIVABLES | 18,000 | ||
| less allowance for receivables | (395) | ||
| lreceivables | 17,605 | ||
| PREPAYMENT | 2,200 | ||
| BANK | 348 | ||
| CASH | 276 | ||
| TOTAL CURRENT ASSETS | 26,309 | ||
| TOTAL ASSETS | 117,309 | ||
| ACCOUNT | WORKING | DEBIT | CREDIT |
| PAYABLES | 16,200 | ||
| ACCRUAL | 1,500 | ||
| TOTAL CURRENT LIABILITY | 17,700 | ||
| Capital | 32,549 | ||
| Profit | 67,462 | ||
| DRAWING | 402 | ||
| TOTAL EQUITY | 99,609 | ||
| TOTAL LIABILITIES & EQUITY | 117,309 |
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2015 ACCA F3 Trading Account