Theory question 104
Incomplete RecordsAmanabo could not keep proper books of his business transactions during the year 1991. The following were extracted from his books:
Purchases - Cash ₦15,000; Credit ₦25,000
Cash received from debtors ₦65,000
Purchase of furniture ₦2,400
Cash Sales ₦25,000
Expenses paid: Salaries of Office Assistants ₦7,200; Electricity ₦1,200; Rent ₦2,400; Insurance ₦4,000; Rate ₦600; Advertisement ₦1,200
Additional Information: (a) (1st January, 1991 | 31st December, 1991): Stock ₦5,000 | ₦7,000; Electricity ₦80 | ₦120; Rent owing ₦200 | ₦180; Insurance prepaid ₦180 | ₦200; Debtors ₦2,500 | ₦3,200; Creditors ₦1,500 | ₦2,220; Rates paid in advance ₦150 | ₦120 (b) Fixed Assets on 1st January 1991 are: Furniture ₦3,600; Motor Vehicles ₦25,000; Buildings ₦35,000 (c) Cash at Bank on 1st January 1991 was ₦10,000 (d) Fixed Assets should be depreciated as follows: Furniture and Building 5%; Motor Vehicle 20%
Prepare: (i) Cash book: (ii) Trading, Profit and Loss Account for the year ended 31st December, 1991.
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Workings (taking ₦25,000 as the year's credit purchases): paid to creditors = 1,500 + 25,000 − 2,220 = 24,280; credit sales = 65,000 + 3,200 − 2,500 = 65,700
(i) Cash Book: Dr balance b/d 10,000; debtors 65,000; cash sales 25,000; total 100,000 / Cr cash purchases 15,000; creditors 24,280; furniture 2,400; salaries 7,200; electricity 1,200; rent 2,400; insurance 4,000; rates 600; advertisement 1,200; balance c/d 41,720
(ii) Trading, Profit and Loss Account for the year ended 31 December 1991: sales (25,000 + 65,700) 90,700; opening stock 5,000 + purchases 40,000 − closing stock 7,000 = cost of sales 38,000; gross profit ₦52,700
Expenses: salaries 7,200; electricity (1,200 + 120 − 80) 1,240; rent (2,400 + 180 − 200) 2,380; insurance (4,000 + 180 − 200) 3,980; rates (600 + 150 − 120) 630; advertisement 1,200; depreciation: furniture 5% × 6,000 = 300, buildings 5% × 35,000 = 1,750, motor vehicle 20% × 25,000 = 5,000; total 23,680
Net profit ₦29,020
Adjust each expense: paid + closing accrual − opening accrual, or paid + opening prepayment − closing prepayment.