FA - Nov 2016 - L1 - Q3 - Preparation of financial statements of a sole trader

FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader

Preparation of Statement of Profit or Loss and Statement of Financial Position for a sole trader from given trial balance and additional information.

Question

BBT, a sole trader, prepared the following Trial Balance from his accounts on 30th September 2016.

	Dr (GHȼ)	Cr (GHȼ)
Sales		181,200
Sales returns	1,810
Purchases	79,310
Discounts received		1,520
Carriage outwards	420
Rent and rates	30,800
Insurance		780
Salaries	20,400
Motor expenses	6,200
General expenses	7,450
Irrecoverable debts	240
Allowance for receivables		280
Drawings		12,100
Loan interest	600
10% Loan		8,000
Motor vehicles	20,000
Accumulated depreciation for motor vehicles		7,600
Equipment	48,050
Accumulated depreciation for Equipment		15,890
Inventory at 1st October 2015	6,200
Receivables	15,000
Payables		16,120
Bank	1,250
Capital		20,000
	250,610	250,610

The following information is also available: i) The closing inventory as at 30th September 2016 was valued at GHȼ6,480. At 30th September 2016, loan interest owing amounted to GHȼ200; rent owing was GHȼ450; whilst insurance was prepaid by GHȼ120. ii) BBT had included his son’s school fees of GHȼ1,400 in general expenses. iii) Receivables have been analysed as follows:

	GHȼ
Current month	8,000
30 to 60 days	4,000
60 to 90 days	2,000
Over 90 days	1,000

Allowance to be made for receivables is as follows:
30 to 60 days: 1%
60 to 90 days: 2.5%
Over 90 days 5%: (after writing off GHȼ500)

iv) One half of the 10% loan is repayable during the year ending 30th September
2016, and the balance after that date.
v) Depreciation is to be provided for as follows.

Equipment: 10% per annum on cost using the straight line method. There were no additions or disposals during the year.
Motor vehicles: 20% per annum by the reducing balance method. There were no additions or disposals during the year.

Required:

a) Prepare, for BBT, the Statement of profit or loss for the year ended 30th September 2016. (12 marks)

b) Prepare, for BBT, the Statement of Financial Position as at 30th September 2016. (8 marks)

Answer