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 | 2,800 | |
| DRAWINGS | 268 | |
| RENT AND INSURANCE | 13,560 | |
| POSTAGE AND STATIONERY | 450 | |
| ADVERTISING | 1,920 | |
| SALARIES AND WAGES | 3,225 | |
| IRRECOVERABLE DEBTS | 201 | |
| ALLOWANCE FOR RECEIVABLES | 336 | |
| RECEIVABLES | 40,500 | |
| PAYABLES | 36,450 | |
| CASH ON HAND | 322 | |
| CASH AT BANK | 522 | |
| INVENTORY AS AT 1 JUNE 20X5 | 8,820 | |
| EQUIPMENT AT COST | 160,000 | |
| ACCUMULATED DEPRECIATION | 32,000 | |
| CAPITAL | 23,802 | |
| 492,588 | 492,588 |
The following additional information as at 31 May 20X6 is available.
1. Rent is accrued by $6,750.
2. Insurance has been prepaid by $3,080.
3. Closing inventory has been counted and is valued at $10,584.
4. $560 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 $6,750.
Debit Rent and insurance expenses and Credit Accrual $6,750.
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 $10,584.
Debit Financial position Inventory and credit profit and loss Inventory $10,584.
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 $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 $24,000SUGGESTED SOLUTIONS
Income statement
| ACCOUNT | WORKING | DEBIT | CREDIT |
| REVENUE | 400,000 | ||
| INVENTORY OB | 8,820 | ||
| PURCHASE | 260000 + 560 | 260,560 | |
| LESS INVENTORY CB | 10,584 | ||
| COST OF SALES | 258,796 | ||
| GROSS PROFIT | 141,204 | ||
| CARRIAGE | 2800-560 | 2,240 | |
| RENT AND INSURANCE | 13560 +6750 -3080 | 17,230 | |
| POSTAGE AND STATIONERY | 450 | ||
| ADVERTISING | 1,920 | ||
| SALARIES AND WAGES | 3,225 | ||
| IRRECOVERABLE DEBTS | 201+115 | 316 | |
| DEPRECIATION EXPENSES | 24000 | 24,000 | |
| TOTAL EXPENSES | 49,381 | ||
| PROFIT | 91,823 |
Financial position
| ACCOUNT | WORKING | DEBIT | CREDIT |
| NON CURRENT ASSETS | 160,000 | ||
| LESS ACC DEP EQUIPMENT | 32000 + 24000 | (56,000) | |
| TOTAL NON CURRENT ASSETS | 104,000 | ||
| CURRENT ASSETS | |||
| INVENTORY | 10,584 | ||
| RECEIVABLES | 40,500 | ||
| less allowance for receivables | (451) | ||
| lreceivables | 40,049 | ||
| PREPAYMENT | 3,080 | ||
| BANK | 522 | ||
| CASH | 322 | ||
| TOTAL CURRENT ASSETS | 54,557 | ||
| TOTAL ASSETS | 158,557 | ||
| ACCOUNT | WORKING | DEBIT | CREDIT |
| PAYABLES | 36,450 | ||
| ACCRUAL | 6,750 | ||
| TOTAL CURRENT LIABILITY | 43,200 | ||
| Capital | 23,802 | ||
| Profit | 91,823 | ||
| DRAWING | 268 | ||
| TOTAL EQUITY | 115,357 | ||
| TOTAL LIABILITIES & EQUITY | 158,557 |
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2015 ACCA F3 Trading Account