Question

175 22.5 The following Trial Balance was extracted from the books of A. Scholes at the close of business on 28 February 19-7. Dr 19,740 11,280 1,140 210 9,900 Purchases and sales Cash at bank Cash in hand Capital Account 1 March 19-6 Drawings Office furniture Rent Wages and salaries Discounts Debtors and creditors Stock 1 March 19-6 Provision for Bad and Doubtful Debts 1 March 19-6 Delivery van Van running costs Bad Debts written off 2,850 1,440 1,020 2,580 690 4,920 2,970 360 2,490 270 2,400 450 810 32,760 32,760 Notes: (a) Stock 28 February 19-7 £3,510. (b) Wages and salaries accrued at 28 February 19-7 £90. (c) Rent prepaid at 28 February 19-7 £140. (d) Van running costs owing at 28 February 19-7 £60. (e) Increase the provision for Bad and Doubtful Debts by £60. 6) Provide the depreciation as follows: Office furniture £180. Delivery van £480. Required: Draw up the Trading and Profit and Loss Accounts for the year ending 28 February 19-7 together with a Balance Sheet as on 28 February 19-7, using vertical formats throughout.

Answer 1

A. Scholes
TRADING AND PROFIT AND LOSS ACCOUNTS
for the year ended 28 February, 19-7
	£	£	£	£
Sales		19740
Less: Discount Allowed		690
NET REVENUE (A)			19050
Less:
Cost of Goods Sold (B) (Working Note -1)			10380
GROSS PROFIT (A-B) ( C)				8670
EXPENSES
Rent		880			(1020-140)
Wages and Salaries		2670			(2580+90)
Van Running costs		510			(450+60)
Bad debts written off		870			(810+60)
Depreciation Expense:
Office Furniture	180
Delivery van	480	660
Total Expenses (D)			5590
NET INCOME (C-D)				3080

A. Scholes
BALANCE SHEET
as on 28 February, 19-7
	£	£	£	£
ASSETS
FIXED ASSETS
Office Furniture	1440
Less: Accumulated Depreciation	180	1260
Delivery Van	2400
Less: Accumulated Depreciation	480	1920
TOTAL FIXED ASSETS (A)			3180
CURRENT ASSETS
Debtors		4920
Cash at Bank		1140
Cash in hand		210
Prepaid Rent		140
Closing Stock		3510
TOTAL CURRENT ASSETS (B)			9920
TOTAL ASSETS (A+B)				13100
LIABILITIES AND EQUITY
LIABILITIES
CURRENT LIABILITIES
Creditors		2490
Provision for bad and Doubtful debts (Working Note 3)		330
Wages and Salaries payable		90
Van Running Costs Payable		60
TOTAL CURRENT LIABILITIES			2970
CAPITAL (Working Note - 2)			10130
TOTAL LIABILITIES AND EQUITY				13100

WORKING NOTE 1)

CALCULATION OF COST OF GOODS SOLD (Opening Stock + purchases - Discount received - Closing Stock)

Opening Stock 1 March 19-6		2970
Purchases	11280
Less: Discount Received	360	10920
Closing Stock 28 February 19-7		3510
Cost of Goods Sold			10380

WORKING NOTE 2)

CALCULATION OF ENDING CAPITAL (Capital at the beginning - Drawings + Net Income)

CAPITAL BALANCE at the End
Capital at the beginning	9900
Less: drawings	2850
Add: Net Income	3080
CLOSING CAPITAL		10130

WORKING NOTE 3)

PROVISION FOR DOUBTFUL DEBTS:

Provision at the beginning	330
Add: Provision added during the year	60
PROVSION FOR DOUBTFUL DEBTS		390