Theory question 104
Incomplete RecordsMufutau is in brick making business. On 2nd January, 1989 he had the following assets and liabilities:
Assets: Delivery Van ₦42,000; Brick-making machine ₦18,000; Debtors ₦7,000; Bank ₦10,000; Stock ₦1,500
Liabilities: Creditors for expenses ₦300
He does not keep proper records of account but the following cash records are available for the year ended 31st December 1989.
Balance 2/1/89 ₦10,000; Receipt from debtors ₦4,500; total ₦14,500
Less Payments: Materials for brick-making ₦5,200; Rep of van ₦1,200; Telephone ₦500; Creditors for expenses ₦300; total ₦7,200; balance ₦7,300
On 31st December 1989, debtors were owing ₦15,000 and closing stock was valued ₦500. The following additional information were also available: (a) Provision for depreciation: Delivery Van ₦1,000; Brick-making machine ₦1,800 (b) Accrued Telephone expenses ₦100 (c) Provision for doubtful debts ₦350
Prepare: (i) Statement of capital at 2/1/89 (ii) Trading, Profit and Loss Account for the year ended 31st December 1989 and (iii) Balance Sheet as at that date.
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(i) Statement of capital at 2 January 1989: assets 42,000 + 18,000 + 7,000 + 10,000 + 1,500 = 78,500 − creditors 300 = capital ₦78,200
Credit sales (debtors control): closing debtors 15,000 + receipts 4,500 − opening debtors 7,000 = ₦12,500
(ii) Trading, Profit and Loss Account for the year ended 31 December 1989: sales 12,500; opening stock 1,500 + materials 5,200 − closing stock 500 = cost of sales 6,200; gross profit ₦6,300
Expenses: van repairs 1,200; telephone 500 + 100 = 600; provision for doubtful debts 350; depreciation van 1,000, machine 1,800; total 4,950; net profit ₦1,350
(iii) Balance Sheet as at 31 December 1989: delivery van 42,000 − 1,000 = 41,000; machine 18,000 − 1,800 = 16,200; fixed assets 57,200
Current assets: stock 500; debtors 15,000 − 350 = 14,650; bank 7,300; total 22,450; total assets ₦79,650
Capital 78,200 + net profit 1,350 = 79,550; accrued telephone 100; total ₦79,650
The ₦300 paid to creditors for expenses clears last year's liability, so it is not this year's expense.