The following trial balance has been extracted from the ledger of Mr You, a sole trader.
| ACCOUNT | DEBIT | CREDIT |
| SALES | 450,000 | |
| PURCHASES | 292,500 | |
| CARRIAGE | 4,480 | |
| DRAWINGS | 67 | |
| RENT AND INSURANCE | 27,120 | |
| POSTAGE AND STATIONERY | 1,800 | |
| ADVERTISING | 320 | |
| SALARIES AND WAGES | 1,290 | |
| IRRECOVERABLE DEBTS | 603 | |
| ALLOWANCE FOR RECEIVABLES | 336 | |
| RECEIVABLES | 13,500 | |
| PAYABLES | 12,150 | |
| CASH ON HAND | 414 | |
| CASH AT BANK | 174 | |
| INVENTORY AS AT 1 JUNE 20X5 | 4,900 | |
| EQUIPMENT AT COST | 180,000 | |
| ACCUMULATED DEPRECIATION | 36,000 | |
| CAPITAL | 28,682 | |
| 527,168 | 527,168 |
The following additional information as at 31 May 20X6 is available.
1. Rent is accrued by $6,000.
2. Insurance has been prepaid by $440.
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 $161.
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 $6,000.
Debit Rent and insurance expenses and Credit Accrual $6,000.
2. Insurance has been prepaid by $440.
Debit Prepayment and Credit Rent and insurance expenses $440
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 $161.
Debit irrecoverable debt and Credit Allowance for receivables $161
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 | 450,000 | ||
| INVENTORY OB | 4,900 | ||
| PURCHASE | 292500 + 896 | 293,396 | |
| LESS INVENTORY CB | 5,880 | ||
| COST OF SALES | 292,416 | ||
| GROSS PROFIT | 157,584 | ||
| CARRIAGE | 4480-896 | 3,584 | |
| RENT AND INSURANCE | 27120 +6000 -440 | 32,680 | |
| POSTAGE AND STATIONERY | 1,800 | ||
| ADVERTISING | 320 | ||
| SALARIES AND WAGES | 1,290 | ||
| IRRECOVERABLE DEBTS | 603+161 | 764 | |
| DEPRECIATION EXPENSES | 27000 | 27,000 | |
| TOTAL EXPENSES | 67,438 | ||
| PROFIT | 90,146 |
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 | 5,880 | ||
| RECEIVABLES | 13,500 | ||
| less allowance for receivables | (497) | ||
| lreceivables | 13,003 | ||
| PREPAYMENT | 440 | ||
| BANK | 174 | ||
| CASH | 414 | ||
| TOTAL CURRENT ASSETS | 19,911 | ||
| TOTAL ASSETS | 136,911 | ||
| ACCOUNT | WORKING | DEBIT | CREDIT |
| PAYABLES | 12,150 | ||
| ACCRUAL | 6,000 | ||
| TOTAL CURRENT LIABILITY | 18,150 | ||
| Capital | 28,682 | ||
| Profit | 90,146 | ||
| DRAWING | 67 | ||
| TOTAL EQUITY | 118,761 | ||
| TOTAL LIABILITIES & EQUITY | 136,911 |
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2015 ACCA F3 Trading Account