The following trial balance has been extracted from the ledger of Mr You, a sole trader.
| ACCOUNT | DEBIT | CREDIT |
| SALES | 400,000 | |
| PURCHASES | 260,000 | |
| CARRIAGE | 3,360 | |
| DRAWINGS | 402 | |
| RENT AND INSURANCE | 13,560 | |
| POSTAGE AND STATIONERY | 2,700 | |
| ADVERTISING | 1,920 | |
| SALARIES AND WAGES | 5,805 | |
| IRRECOVERABLE DEBTS | 335 | |
| ALLOWANCE FOR RECEIVABLES | 224 | |
| RECEIVABLES | 13,500 | |
| PAYABLES | 12,150 | |
| CASH ON HAND | 230 | |
| CASH AT BANK | 87 | |
| INVENTORY AS AT 1 JUNE 20X5 | 7,840 | |
| EQUIPMENT AT COST | 160,000 | |
| ACCUMULATED DEPRECIATION | 32,000 | |
| CAPITAL | 25,365 | |
| 469,739 | 469,739 |
The following additional information as at 31 May 20X6 is available.
1. Rent is accrued by $4,500.
2. Insurance has been prepaid by $880.
3. Closing inventory has been counted and is valued at $9,408.
4. $672 of carriage represents carriage inwards on purchases.
5. The allowance for receivables is to be increased by $138.
6. Equipment is to be depreciated at 15% per annum using the straight-line method.
Required
1. Prepare a statement of profit or loss for the year ended 31 May 20X6.
2. Prepare a statement of financial position as at that date.
Suggested solutions:
Working:
1. Rent is accrued by $4,500.
Debit Rent and insurance expenses and Credit Accrual $4,500.
2. Insurance has been prepaid by $880.
Debit Prepayment and Credit Rent and insurance expenses $880
3. Closing inventory has been counted and is valued at $9,408.
Debit Financial position Inventory and credit profit and loss Inventory $9,408.
4. $672 of carriage represents carriage inwards on purchases.
Debit Purchase and Credit Carriage $672.
5. The allowance for receivables is to be increased by $138.
Debit irrecoverable debt and Credit Allowance for receivables $138
6. Equipment is to be depreciated at 15% per annum using the straight-line method.
Debit depreciation and Credit Accumulated depreciation $24,000SUGGESTED SOLUTIONS
Income statement
| ACCOUNT | WORKING | DEBIT | CREDIT |
| REVENUE | 400,000 | ||
| INVENTORY OB | 7,840 | ||
| PURCHASE | 260000 + 672 | 260,672 | |
| LESS INVENTORY CB | 9,408 | ||
| COST OF SALES | 259,104 | ||
| GROSS PROFIT | 140,896 | ||
| CARRIAGE | 3360-672 | 2,688 | |
| RENT AND INSURANCE | 13560 +4500 -880 | 17,180 | |
| POSTAGE AND STATIONERY | 2,700 | ||
| ADVERTISING | 1,920 | ||
| SALARIES AND WAGES | 5,805 | ||
| IRRECOVERABLE DEBTS | 335+138 | 473 | |
| DEPRECIATION EXPENSES | 24000 | 24,000 | |
| TOTAL EXPENSES | 54,766 | ||
| PROFIT | 86,130 |
Financial position
| ACCOUNT | WORKING | DEBIT | CREDIT |
| NON CURRENT ASSETS | 160,000 | ||
| LESS ACC DEP EQUIPMENT | 32000 + 24000 | (56,000) | |
| TOTAL NON CURRENT ASSETS | 104,000 | ||
| CURRENT ASSETS | |||
| INVENTORY | 9,408 | ||
| RECEIVABLES | 13,500 | ||
| less allowance for receivables | (362) | ||
| lreceivables | 13,138 | ||
| PREPAYMENT | 880 | ||
| BANK | 87 | ||
| CASH | 230 | ||
| TOTAL CURRENT ASSETS | 23,743 | ||
| TOTAL ASSETS | 127,743 | ||
| ACCOUNT | WORKING | DEBIT | CREDIT |
| PAYABLES | 12,150 | ||
| ACCRUAL | 4,500 | ||
| TOTAL CURRENT LIABILITY | 16,650 | ||
| Capital | 25,365 | ||
| Profit | 86,130 | ||
| DRAWING | 402 | ||
| TOTAL EQUITY | 111,093 | ||
| TOTAL LIABILITIES & EQUITY | 127,743 |
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2015 ACCA F3 Trading Account