Theory question 106
Incomplete Records6. Mr. Ekpeyong is a petty trader dealing in electronic gadgets. He has not been keeping his books of accounts but has been taking notes of his transactions. The following information is made available for the year ended 31st December, 2001.
Sales N200,000
Cash banked N130,000
Cheques issued to creditors N105,000
Cash purchases N30,000
Wages and salaries paid by cash N4,000
Rent paid by cash N2,000
Transportation paid by cash N5,400
Telephone charges paid by cash N800
Additional information:
(a) The assets and liabilities at the beginning and end of the period are estimated as follows (1/1/2001; 31/12/2001): Stock N20,000; N40,000. Bank balance N10,000; N20,000. Cash balance N2,000; N12,000. Trade debtors N7,000; N10,000. Trade creditors N3,500; N27,000.
(b) All differences in the reconciliation of takings, banking, disbursements and balances in hand and at bank are to be regarded as Mr. Ekpeyong's personal drawings.
You are required to prepare: (i) Opening Statement of Affairs as at 1st January, 2001; (ii) Trading, Profit and Loss Account for the year ended 31st December, 2001; and (iii) Balance Sheet as at that date.
Show the model answer
(i) Statement of affairs 1/1/2001: stock 20,000; debtors 7,000; bank 10,000; cash 2,000 = 39,000; less creditors 3,500; capital 35,500.
Workings: credit purchases = 105,000 + 27,000 − 3,500 = 128,500; total purchases 128,500 + 30,000 = 158,500. Cash from sales = 200,000 + 7,000 − 10,000 = 197,000.
Cash: 2,000 + 197,000 − banked 130,000 − payments 42,200 (30,000 + 4,000 + 2,000 + 5,400 + 800) − closing 12,000 = drawings 14,800. Bank: 10,000 + 130,000 − 105,000 − closing 20,000 = drawings 15,000. Total drawings 29,800.
(ii) Trading: sales 200,000; opening stock 20,000 + purchases 158,500 − closing stock 40,000 = cost of sales 138,500; gross profit 61,500. Profit and loss: wages 4,000; rent 2,000; transport 5,400; telephone 800 = 12,200; net profit 49,300.
(iii) Balance sheet 31/12/2001: stock 40,000; debtors 10,000; bank 20,000; cash 12,000 = 82,000; less creditors 27,000 = 55,000. Capital 35,500 + net profit 49,300 − drawings 29,800 = 55,000.
Use the cash and bank summaries to find the missing drawings.