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 | 1,680 | |
| DRAWINGS | 402 | |
| RENT AND INSURANCE | 27,120 | |
| POSTAGE AND STATIONERY | 1,350 | |
| ADVERTISING | 960 | |
| SALARIES AND WAGES | 645 | |
| IRRECOVERABLE DEBTS | 335 | |
| ALLOWANCE FOR RECEIVABLES | 392 | |
| RECEIVABLES | 18,000 | |
| PAYABLES | 16,200 | |
| CASH ON HAND | 46 | |
| CASH AT BANK | 174 | |
| INVENTORY AS AT 1 JUNE 20X5 | 1,960 | |
| EQUIPMENT AT COST | 180,000 | |
| ACCUMULATED DEPRECIATION | 36,000 | |
| CAPITAL | 22,580 | |
| 525,172 | 525,172 |
The following additional information as at 31 May 20X6 is available.
1. Rent is accrued by $750.
2. Insurance has been prepaid by $880.
3. Closing inventory has been counted and is valued at $2,352.
4. $336 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 $750.
Debit Rent and insurance expenses and Credit Accrual $750.
2. Insurance has been prepaid by $880.
Debit Prepayment and Credit Rent and insurance expenses $880
3. Closing inventory has been counted and is valued at $2,352.
Debit Financial position Inventory and credit profit and loss Inventory $2,352.
4. $336 of carriage represents carriage inwards on purchases.
Debit Purchase and Credit Carriage $336.
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 | 1,960 | ||
| PURCHASE | 292500 + 336 | 292,836 | |
| LESS INVENTORY CB | 2,352 | ||
| COST OF SALES | 292,444 | ||
| GROSS PROFIT | 157,556 | ||
| CARRIAGE | 1680-336 | 1,344 | |
| RENT AND INSURANCE | 27120 +750 -880 | 26,990 | |
| POSTAGE AND STATIONERY | 1,350 | ||
| ADVERTISING | 960 | ||
| SALARIES AND WAGES | 645 | ||
| IRRECOVERABLE DEBTS | 335+161 | 496 | |
| DEPRECIATION EXPENSES | 27000 | 27,000 | |
| TOTAL EXPENSES | 58,785 | ||
| PROFIT | 98,771 |
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 | 2,352 | ||
| RECEIVABLES | 18,000 | ||
| less allowance for receivables | (553) | ||
| lreceivables | 17,447 | ||
| PREPAYMENT | 880 | ||
| BANK | 174 | ||
| CASH | 46 | ||
| TOTAL CURRENT ASSETS | 20,899 | ||
| TOTAL ASSETS | 137,899 | ||
| ACCOUNT | WORKING | DEBIT | CREDIT |
| PAYABLES | 16,200 | ||
| ACCRUAL | 750 | ||
| TOTAL CURRENT LIABILITY | 16,950 | ||
| Capital | 22,580 | ||
| Profit | 98,771 | ||
| DRAWING | 402 | ||
| TOTAL EQUITY | 120,949 | ||
| TOTAL LIABILITIES & EQUITY | 137,899 |
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2015 ACCA F3 Trading Account