Theory question 108
Final Accounts of a Sole TraderThe following Trial Balance was extracted from the books of Bamitolu on 31st December, 2009.
Stock – 1st January, 2009: Dr ₦80,500
Motor vehicles: Dr ₦58,000
Buildings: Dr ₦176,000
Furniture and fittings: Dr ₦26,000
Debtors and creditors: Dr ₦98,300; Cr ₦72,000
Purchases and sales: Dr ₦395,700; Cr ₦589,200
Returns: Dr ₦10,500; Cr ₦9,700
Discounts: Dr ₦12,500; Cr ₦14,000
Wages and salaries: Dr ₦49,200
Drawings: Dr ₦16,400
Loan from Thomas: Cr ₦60,000
Bad debts: Dr ₦3,500
Loan interest: Dr ₦3,000
General expenses: Dr ₦16,800
Stationery: Dr ₦1,800
Rent and rate: Dr ₦12,400
Petty cash: Dr ₦400
Cash in hand: Dr ₦1,300
Cash at bank: Dr ₦32,600
Capital: Cr ₦250,000
Totals: Dr ₦994,900; Cr ₦994,900
Additional information:
(i) Stock — 31st December, 2009: ₦91,200
(ii) Depreciation: Motor vehicles 25%; Buildings 5%; Furniture and fittings 10%
(iii) Make a 5% provision for doubtful debts.
(iv) ₦2,300 paid by a doctor during the year was mistakenly credited to Sales Account.
(v) Goods worth ₦1,600 withdrawn by Bamitolu was not accounted for.
You are required to prepare: (a) Trading, Profit and Loss Account for the year ended 31st December, 2009. (b) A Balance Sheet as at that date.
Show the model answer
(a) Trading, Profit and Loss Account
Sales 589,200 − 2,300 (debtor's payment wrongly credited to sales) = 586,900 − returns inwards 10,500 = 576,400
Purchases 395,700 − returns outwards 9,700 − goods taken by owner 1,600 = 384,400
Cost of sales: 80,500 + 384,400 − 91,200 = 373,700
Gross profit ₦202,700; add discounts received 14,000 = 216,700
Expenses: loan interest 3,000; discounts allowed 12,500; wages and salaries 49,200; bad debts 3,500; rent and rates 12,400; general expenses 16,800; stationery 1,800; provision for doubtful debts (5% × 96,000) 4,800; depreciation: motor vehicles (25% × 58,000) 14,500, buildings (5% × 176,000) 8,800, furniture (10% × 26,000) 2,600 = 129,900
Net profit ₦86,800
(b) Balance Sheet as at 31/12/2009
Fixed assets (cost − depreciation = NBV): motor vehicles 58,000 − 14,500 = 43,500; buildings 176,000 − 8,800 = 167,200; furniture 26,000 − 2,600 = 23,400; total 234,100
Current assets: stock 91,200; debtors (98,300 − 2,300) 96,000 − provision 4,800 = 91,200; cash at bank 32,600; cash in hand 1,300; petty cash 400 = 216,700
Less current liabilities: creditors 72,000 → working capital 144,700
Total 378,800; less loan from Thomas 60,000 = 318,800
Capital 250,000 + net profit 86,800 − drawings (16,400 + 1,600) 18,000 = ₦318,800
Make the two corrections (sales/debtors and goods taken by the owner) before preparing the accounts.