Theory question 109
Final Accounts of a Sole TraderThe following balances were extracted from the books of Bonjuri, a retailer as at 31st March, 2014. (Dr / Cr, Le)
Capital / 100,000
Drawings 50,000
Cash in hand 1,000
Cash at bank 18,500
Debtors and creditors 70,000 / 4,000
Insurance 2,500
Purchases and sales 535,000 / 700,000
Stock: 1st April, 2013 50,000
Electricity 2,000
General expenses 13,000
Equipment at cost 15,000
Provision for depreciation of Equipment - 1st April, 2013 / 3,000
Wages and salaries 30,000
Rent 20,000
Totals 807,000 / 807,000
Additional information: (i) Stock on 31st March, 2014 was valued at Le 60,000; (ii) At 31st March, 2014: Le 1,500 was outstanding on insurance; electricity was prepaid by Le 500 and there was a doubtful debt of Le 1,000; (iii) Depreciation is to be provided on equipment at 10% on cost.
You are required to prepare: (a) Trading, Profit and Loss Account for the year ended 31st March, 2014; (b) Balance Sheet as at that date.
Show the model answer
(a) Trading (Le): sales 700,000; cost of sales = opening stock 50,000 + purchases 535,000 - closing stock 60,000 = 525,000; gross profit 175,000.
Profit and loss: insurance (2,500 + 1,500) 4,000; electricity (2,000 - 500) 1,500; provision for doubtful debts 1,000; wages and salaries 30,000; rent 20,000; general expenses 13,000; depreciation (10% × 15,000) 1,500 = 71,000. Net profit 104,000.
(b) Balance Sheet at 31 March 2014 (Le): Equipment 15,000 - depreciation (3,000 + 1,500) 4,500 = 10,500.
Current assets - stock 60,000; debtors 70,000 - 1,000 = 69,000; electricity prepaid 500; cash at bank 18,500; cash in hand 1,000 = 149,000.
Current liabilities - creditors 4,000; insurance owing 1,500 = 5,500. Working capital 143,500. Net assets 154,000.
Financed by: capital 100,000 + net profit 104,000 - drawings 50,000 = 154,000.
Adjust each expense for amounts owing or prepaid before charging it.