INCOMPLETE RECORDS—A Level

Answer the following.

1.Lance does not keep full books of account. He has, however, been able to provide the following
information for the year ended 30 April 2021.

(1) Bank account

Dr $ $ Cr

Receipts from trade receivables 27 450 Balance b/d at 1 May 2020 3 185
Transfer from cash 23 890 Payments to trade payables 39 670
Proceeds from sale of vehicle 1 800 Wages 6 250
Balance c/d at 30 April 2021 3 265 Rent and rates 7 300

56 405 56 405

(2) Assets and liabilities:

At 1 May 2020 $ At 30 April 2021 $

Cash in hand 340 690

Equipment at net book value 3 720 2 975
Inventory 04 740 5 270
Rates paid in advance – 470
Rent accrued 535 –
Trade payables 1 980 1 295
Tra de receivables 2 640 3 120
Vehicles at net book value 20 550 14 530

(3) Cash sales for the year were $ 35 750. The following cash payments were made.

General expenses 520

Purchases 2100
Drawings 6700

Lance suspects that a dishonest employee may have stolen some cash from the business.

(4) The vehicle sold for $ 1800 had a net book value of $ 2420. No vehicles were purchased during the year.
(5) No equipment was purchased or disposed of during the year.
(6) All goods are sold with a 60% mark-up on cost price.
(7) No record has been kept of the amount of goods taken by the owner for personal use.

Prepare an income statement for the year ended 30 April 2021.

2.Kevin Greenslade, a retailer, did not keep a full set of accounting records for his business. However, the
following information has been obtained for the year ended 30 April 2022.

At 30 April 2021 $

Non-current assets at net book value 72 600

Trade receivables 7 140
Trade payables 4 285
Rent prepaid 1 200
Telephone expenses accrued 325
Inventory 8 570

Dr Bank Account Cr

$ $

Balance b/d at 1 May 2021 1 950 Payments to trade payables 51 420

Receipts from trade receivables 85 700 Rent 14 400
Balance c/d at 30 April 2022 2 340 Telephone expenses 3 900

General expenses 5 680

Drawings 14 590

89 990 89 990

Additional information:

Income Statement for the year ended 30 April 2022

$ $

Revenue (sales) 87 840

Cost of sales:
Opening inventory 8 570
Purchases 52 490
Closing inventory ? ?

Gross profit ?
Less expenses:
Telephone 3 980
Rent 14 100
General expenses 5 680
Depreciation ? ?
Profit (net profit)/Loss (net loss) for year ?

(1) There were no additions or disposals of non-current assets during the year.
(2) There were no cash sales or cash purchases during the year.
(3) Depreciation of non-current (fixed) assets was provided at 25% using the reducing balance method.
(4) All sales achieved a 40% gross profit margin.

Prepare statement of Financial Position for Kevin Greenslade’s business at 30 April 2022. Prepare detailed
calculations of missing figures for assets, liabilities and capital.
3.Hugsy started business on 1 May 2020 with $ 4 000 cash which she paid into a Bank Account. She did not
maintain a set of formal books of account, but the following information is available.

(1) All sales and purchases of goods were on credit.

(2) Purchases of goods totalled $ 78 350. Of this sum Hugsy owed $ 6 240 to trade payables on 30 April
2021, the remainder had been paid by cheque.

(3) Sales of goods totalled $ 126 400. Of this sum Hugsy was owed $ 14 800 by trade receivables on 30 April
2021, the remainder had been received by cheque.

(4) Inventory on 30 April 2021 was $ 7 900

(5) Non-current assets were purchased during the year for $ 27 000, payment was made by cheque. Non-
current assets were valued on 30 April 2021 at $ 20 500

(6) Rent of premises is $ 10 000 per annum. On 30 April 2021 Hugsy still owed the last quarter’s (three
months’) rent.

(7) Wages paid to staff were $ 1 100 per month. Payment for April 2021 is still owing.

(8) Hugsy withdrew drawings of $ 400 per month from the bank.

(9) General expenses incurred for the year were $ 15 500. On 30 April 2021, general expenses of $720 were
prepaid and $1 400 were accrued. General expenses were paid by cheque.

(10) Hugsy took out a 6% bank loan on 1 August 2020 for $30 000. No interest had been paid on the loan at
30 April 2021.

Required

(a) Prepare the summarised Bank Account for the year ended 30 April 2021.

(b) Prepare the:

(i) Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 April 2021

(ii) Statement of Financial Position at 30 April 2021.

(c) Evaluate the decision of Hugsy not to maintain formal books of account.
MARKING SCHEME

1. Income statement (trading and profit and loss

account) for Lance for the year ended 30 April 2011

£ £
Revenue (sales) (W1) 63 680 (3)
Cost of sales:
Opening inventory (stock) * 4 740 (1 for both)
Purchases 41 085 (W2) (3) - 755 (W8) (3) 40 330
Closing inventory (stock) * (5 270) 39 800
Gross profit Less 23 880
expenses:
Rent and rates (W3) 6 295 (3)
Equipment depreciation (W4) 745 (2)
Loss on vehicle disposal (W5) 620 (2)
Vehicles depreciation (W6) 3 600 (3)
Cash stolen (W7) 2 190 (4)
General Expenses 520 (1)
Wages 6 250 (1) 20 220
Profit for the year (net profit) 3 660

(W1) £ (W2) £ (W3) £

Revenue: Purchases: Rent & rates:
Bal c/d 3 120 (1)* Bal c/d 1 295 (1)* Paid 7 300 (1)
Received 27 450 (1) Paid 39 670 (1) Bal b/d (535) (1)
Bal b/d (2 640) * Bal b/d (1 980) * Bal c/d (470) (1)
Credit sales 27 930 Credit 38 985
purchases
Cash sales 35 750 (1) Cash 2 100 (1)
purchases
Total 63 680 OF Total 41 085 OF Total rent & 6 295 OF
revenue purchases rates

*In W1 and W2 1 mark awarded if both balances are shown

 (W4) £ (W5) £ (W6) £
Equipment Loss on Vehicle
depreciation: disposal: depreciation:
NBV b/d 3 720 (1) NBV 2 420 (1) NBV c/d (14 530) (1)
NBV c/d (2 975) (1) Proceeds (1 800) (1) NBV b/d 20 550 (1)
Depreciation 745 OF Loss on 620 OF 6 020
charge disposal
NBV on (2 420) (1)
disposal
Depreciation 3 600 OF
charge

(W7) Cash Account

£ £
Balance b/d 340 (1) General expenses 520 (1) *
Takings 35 750 (1) Purchases 2 100
Drawings 6 700
Banked 23 890
Stolen cash 2 190 OF
Balance c/d 690 (1)
36 090 36 090

Goods for own use:

63 680 x 100 = 39 800 (1CF) + (5 270 – 41 085 – 4 740) (1OF) = –755 (1OF)*
160

*This mark is for deducting OF from purchases in income statement

 Balance sheet for Kevin Greenslade at 30 April 2012 (*)

£ £ £
Non-current (fixed) assets (**) 54 450 (3) W1

Current assets (**)

Inventory (stock) 8 356 (5) W2
Trade receivables (debtors) 9 280 (3) W3
Prepaid expenses 1 500 (3) W4
19 136
Current liabilities (**)
Bank overdraft 2 340 (1)
Trade payables (creditors) 5 355 (3) W5
Accrued expenses 405 (3) W6
8 100

Net current assets (**) 11 036

65 486
Capital (**)
Opening capital 86 850 (3) W7
Loss for the year (net loss) (6 774) (1) OF
Drawings (14 590) (1)
65 486
W1
Non-current (fixed) assets
Depreciation for the year: £72 600 x 25% (1) = £18 150 (1) OF
Net book value: £72 600 - £18 150 = £54 450 (1) OF

W2
Inventory (stock)
Cost of sales: Sales £87 840 x 60% (1) = £52 704 (1) OF £
Cost of sales 52 704
Opening inventory (stock) (8 570) (1)
Purchases (52 490) (1)
Closing inventory (stock) 8 356 (1)* OF

W3
Trade receivables (debtors): £
Sales 87 840
Receipts (85 700) (1)
Bal b/d 7 140 (1)
Bal c/d 9 280 (1)* OF

W4
Prepaid expenses (rent): £
Income Statement (P&L a/c) 14 100
Payments (14 400) (1)
Bal b/d (1 200) (1)
Bal c/d 1 500 (1)* OF

W5
Trade payables (creditors): £
Income Statement (P&L a/c) 52 490
Payments (51 420) (1)
Bal b/d 4 285 (1)
Bal c/d 5 355 (1)* OF

W6
Accrued expenses (telephone): £
Income Statement (P&L a/c) 3 980
Payments (3 900) (1)
Bal b/d 325 (1)
Bal c/d 405 (1)* OF
W7
Statement of affairs:
Assets Liabilities
£ £
Non-current (fixed) assets 72 600
Trade receivables (debtors) 7 140
Trade payables (creditors) 4 285
Prepaid expense 1 200
Accrued expense 325
Inventory (stock) 8 570
Bank 1 950
Capital 86 850
91 460 91 460

£91 460 (1) - £4 610 (1) = £86 850 (1) OF

Date Details £ Date Details £

2020/21 2020/21
1 May Capital 4 000 Trade 72 110 (1) AO1
payables/purchases
Trade 111 600 (1) AO1 Non-current assets 27 000 (1) AO1
receivables/sales
6% bank loan 30 000 (1) AO1 Rent 7 500 (1) AO2
Wages 12 100 (1) AO2
Drawings 4 800 (1) AO1
General expenses 14 820 (1) AO3
30 April Balance c/d 7 270
145 600 145 600
1 May Balance b/d 7 270

Hugsy
Statement of Profit or Loss and Other Comprehensive Income for the year ended 30
April 2021

£ £
Revenue 126 400 (1) AO1
Less
Purchases 78 350 (1) AO1
Less Closing inventory (7 900)
Cost of sales (70 450) (1of) AO2 + w
Gross profit 55 950
less
Depreciation on non-current assets 6 500 (1) AO2
Rent 10 000 (1) AO1
Wages 13 200 (1) AO2
Other expenses 15 500 (1) AO1
Bank loan interest 1 350 (1) AO3
(46 550)
Profit for the year 9 400

Statement of Financial Position at 30 April 2021.

£ £
 Non-current Assets 20 500 (1) AO2

Current Assets
Inventory 7 900
Trade receivables 14 800
Other receivables 720 (1) AO2
Bank 7 270 (of)
30 690 (1of) AO3
51 190

Capital 4 000
Profit for the year 9 400 of
13 400
Drawings (4 800)
8 600 (1of) AO2
Non-current Liabilities
6% bank loan 30 000 (1) AO2 +w

Current Liabilities
Trade payables 6 240
Other payables (2 500 + 1 100 +1 400 +1 350) 6 350 (3) AO2
Two correct [1] AO2 Three correct [2] AO2 12 590
Four correct [3] AO2 51 190

(8)
Points in favour of a formal set of books of account Can manage the business more effectively.

Can address queries from suppliers or customers. Can establish profit/loss at regular intervals.

Trade receivables and trade payables balances available.

Points against a formal set of books

The time and cost in maintaining formal records. Will require some professional input.

May have to learn how to keep books herself