Theory question 107
Incomplete RecordsDauda, a retailer, does not keep proper books of account. The following were balances in his books on January 1, 2013. (D) Premises 70,000; Equipment 8,200; Vehicles 5,100; Inventory 9,500; Accounts receivable 150; Bank 1,400
The summary of his bank statement for the twelve months period from 1st January, 2013 to 31st December, 2013 was as follows: (D)
Money paid to the bank: Shop takings 96,500; Received from debtors 1,400; Additional capital 8,000
Payments made by cheque: Inventory purchased 70,500; Delivery Van 6,200; Maintenance of vehicle 1,020; Electricity and water 940; Store boys' wages 5,260; Miscellaneous expenses 962
Additional information: (i) Dauda paid all shop takings for the year into the bank apart from monthly drawings of D500 and miscellaneous expenses of D408. (ii) He was owing D7,600 for supplies for inventory bought. (iii) The accounts receivable is to be treated as bad debts. (iv) Inventory was valued at D13,620. (v) Depreciation for the year was calculated as D720 for equipment and D1,000 for vehicles.
You are required to prepare: (a) Statement of Affairs as at 01/01/13; (b) Income Statement for the year ended 31st December, 2013 and (c) Bank Account.
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(a) Statement of affairs at 1 January 2013 (D): premises 70,000; equipment 8,200; vehicles 5,100; inventory 9,500; accounts receivable 150; bank 1,400 = 94,350. No liabilities, so capital = D94,350.
(b) Income statement for 2013 (D): sales = shop takings banked 96,500 + drawings (12 × 500) 6,000 + expenses paid from takings 408 + credit sales received 1,400 = 104,308.
Cost of sales: opening inventory 9,500 + purchases (70,500 + 7,600) 78,100 - closing inventory 13,620 = 73,980. Gross profit 30,328.
Expenses: store boys' wages 5,260; maintenance of vehicles 1,020; bad debts 150; miscellaneous (962 + 408) 1,370; electricity and water 940; depreciation - equipment 720, vehicles 1,000 = 10,460. Net profit D19,868.
(c) Bank Account (D): Dr - balance b/d 1,400; shop takings 96,500; debtors 1,400; additional capital 8,000 = 107,300. Cr - inventory 70,500; delivery van 6,200; maintenance 1,020; electricity and water 940; wages 5,260; miscellaneous 962; balance c/d 22,418 = 107,300.
Takings not banked (drawings and cash expenses) must be added back to find sales.