Theory question 105
Final Accounts of a Sole TraderThe trial balance of Ahoofe Trading Enterprises as at 31st December 2020 was as follows: (Dr / Cr, GH¢)
Fixtures and Fittings 120,400
Motor Vehicle 44,000
Debtors and creditors 9,400 / 7,600
Purchases 60,300
Sales / 184,900
Discounts 2,900 / 2,500
Electricity 3,100
Stock (1/1/2020) 16,300
Cash 54,600
Carriage inwards 4,000
Distribution expenses 2,200
Returns 4,500 / 3,000
Rent 24,000
Interest expenses 3,500
Loan / 30,000
Capital / 121,200
Totals 349,200 / 349,200
Additional information:
(i) Depreciation for all fixed assets is at 15% per annum on cost; (ii) Electricity prepaid was GH¢640 and rent in arrears was GH¢12,000. (iii) Closing stock was valued at GH¢24,200.
You are required to prepare:
(a) Trading, Profit and Loss Account for the year ended 31st December, 2020.
(b) Balance Sheet as at 31st December, 2020.
Show the model answer
(a) Trading, Profit and Loss Account (GH¢):
Sales 184,900 − returns inwards 4,500 = 180,400
Opening stock 16,300 + purchases (60,300 − returns outwards 3,000) 57,300 + carriage inwards 4,000 = 77,600 − closing stock 24,200 = cost of sales 53,400
Gross profit 127,000; add discount received 2,500 = 129,500
Expenses: discount allowed 2,900; electricity (3,100 − 640) 2,460; distribution 2,200; rent (24,000 + 12,000) 36,000; interest 3,500; depreciation – fixtures (15% × 120,400) 18,060, motor vehicle (15% × 44,000) 6,600 = 71,720
Net profit GH¢57,780
(b) Balance Sheet as at 31 December 2020 (GH¢):
Fixed assets: fixtures 120,400 − 18,060 = 102,340; motor vehicle 44,000 − 6,600 = 37,400; total 139,740
Current assets: stock 24,200; debtors 9,400; electricity prepaid 640; cash 54,600 = 88,840
Less current liabilities: creditors 7,600; rent accrued 12,000 = 19,600
Working capital 69,240; total 208,980; less loan 30,000 = 178,980
Financed by: capital 121,200 + net profit 57,780 = 178,980
Dr returns are returns inwards and Dr discounts are discount allowed; adjust electricity and rent before charging them.