Theory question 105
Incomplete RecordsOLUCHI is a trader who does not keep a complete set of accounting records but is able to produce the following information (1st January 2019 / 31st December 2019, ₦):
Debtors 190,000 / 230,000
Creditors 120,000 / 90,000
Bank 68,000 / 124,000
Fittings 150,000 / 135,000
Stock 124,000 / 140,000
Expenses accrued 22,000 / 18,000
Rent prepaid 200,000 / 100,000
Cash sales were deposited to the bank after payment for expenses of ₦66,000 and drawing of ₦30,000. The bank account showed the following:
Bank account as at 31st December 2019 (₦)
Dr: Balance b/f (1/1/19) 68,000; Receipt from customers 236,000; Cash deposits from sales 198,000 = 502,000
Cr: Payment to suppliers 320,000; Expenses 58,000; Balance c/d 124,000 = 502,000
You are required to prepare: (a) Total Debtors Account (b) Sales Account (c) Total Creditors Account (d) Trading, Profit and Loss Account for the year ended 31st December, 2019
Show the model answer
(a) Total Debtors Account (₦): Dr Balance b/d 190,000; Credit sales (balancing) 276,000 = 466,000 | Cr Bank 236,000; Balance c/d 230,000.
(b) Sales Account: Cr cash sales (198,000 banked + 66,000 expenses + 30,000 drawings) 294,000; credit sales 276,000 | Dr Trading account 570,000.
(c) Total Creditors Account: Dr Bank 320,000; Balance c/d 90,000 = 410,000 | Cr Balance b/d 120,000; Purchases (balancing) 290,000.
(d) Trading, Profit and Loss Account: Sales 570,000; opening stock 124,000 + purchases 290,000 − closing stock 140,000 = cost of sales 274,000; gross profit 296,000.
Expenses: general expenses (58,000 + 66,000 − 22,000 + 18,000) 120,000; rent (prepayment used 200,000 − 100,000) 100,000; depreciation of fittings (150,000 − 135,000) 15,000 = 235,000. Net profit ₦61,000.
Find credit sales and purchases as balancing figures; cash sales include what was spent before banking.