Theory question 107
Incomplete RecordsOlu, a sole trader has the following financial details for the year ended 31st December, 2016.
Cash Book (Summary) (₦): Dr Balance b/d 6,000; Sales 10,000; Debtors 20,000 = 36,000 | Cr Creditors 12,000; Salaries 5,000; Rent and rates 4,000; Insurance 1,000; Balance c/d 14,000 = 36,000
Additional information (1st January 2016 / 31st December 2016, ₦):
Stock 4,000 / 2,000
Land and building 15,000 / 15,000
Motor vehicle 6,000 / 4,000
Debtors 2,000 / 3,000
Creditors 1,000 / 500
Insurance owing 2,000 / 6,000
You are required to prepare: (a) Statement of affairs as at 1st January, 2016. (b) Trading and Profit and Loss Account for the year ended 31st December, 2016. (c) Balance sheet as at 31st December, 2016.
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(a) Statement of affairs at 1/1/2016 (₦): stock 4,000; land and building 15,000; motor vehicle 6,000; debtors 2,000; cash 6,000 = 33,000; less creditors 1,000 and insurance owing 2,000 = 3,000; capital 30,000.
(b) Sales = cash 10,000 + credit (20,000 + 3,000 − 2,000 = 21,000) = 31,000. Purchases = 12,000 + 500 − 1,000 = 11,500.
Trading: sales 31,000; opening stock 4,000 + purchases 11,500 − closing stock 2,000 = cost of sales 13,500; gross profit 17,500.
Profit and loss: salaries 5,000; rent and rates 4,000; insurance (1,000 − 2,000 + 6,000) 5,000; depreciation of motor vehicle (6,000 − 4,000) 2,000 = 16,000. Net profit ₦1,500.
(c) Balance sheet at 31/12/2016: fixed assets – land and building 15,000; motor vehicle 4,000 = 19,000. Current assets – stock 2,000; debtors 3,000; cash 14,000 = 19,000; less creditors 500 and insurance owing 6,000 = 6,500; working capital 12,500. Net assets 31,500. Capital 30,000 + net profit 1,500 = 31,500.
Opening capital from the statement of affairs; sales and purchases from the debtors and creditors movements.