ANSWERS TO QUESTIONS ON PREPARATION OF FINANCIAL STATEMENTS

(Questions 1 to 11)

Answer to Question 1

INCOME STATEMENT FOR THE YEAR ENDED 31 DEC 2022

P P P
Sales 40 000
Less Returns Inwards (300) 39 700
Less Cost of Goods Sold:
Opening Inventory 4 000
Add Purchases 10 000
Add Carriage Inwards 200
10 200
Less Returns Outwards (500) 9 700
Cost of Goods available for sale 13 700
Less closing inventory (3 000) (10 700)
Gross Profit 29 000
Other Income:
Add commission received 400
Add Discounts received 600
Add Rent received 500 1 500
Total Income 30 500
Less Expenses:
Salaries & wages 2 500
Insurance 1 100
Rent 500
General Expenses 1 200
Discounts Allowed 1 000
Carriage Outwards 300
Bad debts 900 (7 500)
Net Profit 23 000

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 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
Non-Current Assets: Cost (P) Acc. Dep (P) Net Book
Value (P)
Land and Buildings at cost 25 000 - 25 000
Furniture and Fixtures at cost 2 500 - 2 500
Motor vehicles at cost 12 500 12 500
Office equipment at cost 5 000 5 000
Total Non-current Assets 45 000
Current Assets:
Closing Inventory 3 000
Accounts Receivable 4 500
Cash at Bank 3 200
Cash in hand 300
Total Current Assets 11 000
Total Assets 56 000
Current Liabilities:
Accounts Payable 3 000
Total Current Liabilities 3 000
Non-current liabilities
Long Term borrowings (Loan) 7 000
Total non-current liabilities 7 000
Total Liabilities (10 000)
Net Assets 46 000
Capital :
Capital as per Trial Balance 25 000
Add Net Profit 23 000
48 000
Less Drawings (2 000)
Total Capital 46 000

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Question 2: Income Statement for the year ended 31 May 2022

P P P
Sales 50 000
Less Returns Inwards (500) 49 500
Less Cost of Goods sold:
Opening Inventory 6 000
Add Purchases 20 000
Add Carriage Inwards 1 000
21 000
Less Returns Outwards (500) (20 500)
Cost of goods available for sale 26 500
Less Closing Inventory (10 000) (16 500)
Gross Profit 33 000
Other Income:
Add Commission received 800
Add accrued commission 200 1 000
Add discounts received 1 000 2 000
Total Income 35 000
Less Expenses:
Salaries 3 500
Less prepaid (400) 3 100
Office expenses 7 000
Add accrued 1 000 8 000
Discounts allowed 500
Repairs and maintenance 700
Carriage outwards 500
Bad debts 200
Depreciation : Furniture and fittings 30000*10% 3 000
Total Expenses (16 000)
Net Profit 19 000

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 Statement of Financial Position as at 31 May 2022

Non-Current Assets: Cost (P) Accumulated Net Book

Depreciation Value (P)
(P)
Equipment 30 000 (10000+3000) 17 000
Total Non-current Assets 17 000
Current Assets:
Closing Inventory 10 000
Accounts Receivable 9 000
Prepaid salaries 400
Accrued commission 200
Cash at bank 20 000
Total Current Assets 39 600
Total Assets 56 600
Less Liabilities:
Current Liabilities:
Accounts Payable 2 100
Accrued office expenses 1 000
Total current liabilities 3 100
Non-current liabilities
Long Term borrowings (Loan) 7 500
Total non-current liabilities 7 500
Total Liabilities (10 600)
NET ASSETS 46 000
Capital as per Trial Balance 35 000
Add Net profit 19 000
54 000
Less Drawings (8 000)
TOTAL CAPITAL 46 000

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Answer to Question 3:

Income Statement for the year ended 31st March 2023

P P P
Sales 50 000
Less Returns Inwards (400) 49 600
Less Cost of Goods sold:
Opening Inventory 2 000
Add Purchases 22 000
Add Carriage Inwards 300
22 300
Less Returns Outwards (1 000)
21 300
Less Drawings (Goods taken for personal (500) 20 800
use)
Cost of goods available for sale 22 800
Less Closing Inventory (5 000) (17 800)
Gross Profit 31 800
Other Income:
Add Commission received 2 000
Add accrued commission 2 000 4 000
Add rent received from sub-letting 1 000
Less rent received in advance (500) 500
Total Income 36 300
Less Expenses:
Salaries and wages 6 000
Add accrued wages 200 6 200
Rent, Rates and Insurance 4 000
Less prepaid rates (1 000) 3 000
Interest on overdraft 800
Bad Debts 500
Add additional bad debts now written off 1 000 1 500
Depreciation: Motor Van 30 000*5% 1 500
Depreciation: Furniture & Fittings 20000-5000*20% 3 000
Total Expenses (16 000)
Net Profit 20 300

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 Statement of Financial Position as at 31 March 2023

Non-Current Assets: Cost (P) Accumulated Net Book

Depreciation (P) Value (P)
Motor Van 30 000 (10000+1500) 18 500
Furniture and Fittings 20 000 (5000+3000) 12 000
Total Non-current Assets 30 500
Current Assets:
Closing Inventory 5 000
Accounts Receivable 5 000
Less Bad debts now written off (1 000) 4 000
Prepaid Rates 1 000
Accrued commission 2 000
Total Current Assets 12 000
Total Assets 42 500
Less Liabilities:
Current Liabilities:
Accounts Payable 4 000
Accrued carriage inwards 200
Rent received in advance 500
Bank Overdraft 3 000
Total current Liabilities 7 700
Non-current Liabilities
Long Term Loan 5 000
Total non-current liabilities 5 000
Total Liabilities (12 700)
NET ASSETS 29 800
Capital as per Trial Balance 15 000
Add Net profit 20 300
35 300
Less Drawings 5 000
Add goods taken for personal use 500 (5 500)
TOTAL CAPITAL 29 800

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Answer to Question 4:

Income Statement for the year ended 31 December 2022

P P P
Sales 40 000
Less Returns Inwards (400) 39 600
Less Cost of Goods sold:
Opening Inventory 9 000
Add Purchases 10 600
Add Carriage Inwards 400
11 000
Less Returns Outwards (500)
10 500
Less Drawings (Goods taken for personal (800) 9 700
use)
Cost of goods available for sale 18 700
Less Closing Inventory (6 000) (12 700)
Gross Profit 26 900
Other Income:
Add discounts received 1 000
Add Commission received 200
Add accrued commission 150 350
Add rent received from sub-letting 1 500
Less rent received in advance (500) 1 000 2 350
Total Income 29 250
Less Expenses:
Salaries and wages 4 500
Less prepaid wages (300) 4 200
Office expenses 3 900
Add accrued 150 4 050
Rates and Insurance 1 500
Carriage outwards 100
Discounts allowed 700
Bad Debts 200
Add additional bad debts now written off 1 500 1 700
Depreciation: Delivery van 30000-10000*10% 2 000
Depreciation: Office Equipment 25 000*5% 1 250
Total Expenses (15 500)
Net Profit 13 750

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 Statement of Financial Position as at 31 December 2022

Non-Current Assets: Cost (P) Accumulated Net Book

Depreciation (P) Value (P)
Delivery van 30 000 (10000+2000) 18 000
Office Equipment 25 000 (5000+1250) 18 750
Total Non-current Assets 36 750
Current Assets:
Closing Inventory 6 000
Accounts Receivable 6 000
Less Bad debts now written off (1 500) 4 500
Prepaid Wages 300
Accrued commission 150
Cash in hand 100
Cash at bank 4 000
Total Current Assets 15 050
Total Assets 51 800
Less Liabilities:
Current Liabilities:
Accounts Payable 5 000
Accrued office expenses 150
Rent received in advance 500
Total current liabilities 5 650
Non-current liabilities
Long Term borrowings (Loan) 10 000
Total Long term liabilities 10 000
Total Liabilities (15 650)
NET ASSETS 36 150
Capital as per Trial Balance 25 000
Add Net profit 13 750
38 750
Less Drawings 1 800
Add goods taken for personal use 800 (2 600)
TOTAL CAPITAL 36 150

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