BAC4023 W10 - Preparation of Financial Statements EXAMPLE
BAC4023 W10 - Preparation of Financial Statements EXAMPLE
BAC4023 W10 - Preparation of Financial Statements EXAMPLE
The following trial balance was extracted from the ledger of Tom John, a sole trader, as at 31
May 2019 – the end of his financial year.
Tom John
Trial Balance as at 31 May 2019
(a) Inventory as at the close of business has been valued at cost at £42,000.
(b) Wages and salaries need to be accrued by £800.
(c) Other operating expenses are prepaid by £300.
(d) The allowance for receivables is to be adjusted so that it is 2% of trade receivables.
(e) Depreciation for the year ended 31 May 2019 has still to be provided for as follows:
Property: 1.5% per annum using the straight-line method; and
Equipment: 25% per annum using the reducing balance method.
Required
Prepare Tom John's Income Statement for the year ended 31 May 2019 and his Statement
of Financial Position as at that date.
BAC4023 WEEK 10: FINANCIAL STATEMENTS EXAMPLE
BAC4023 WEEK 10: FINANCIAL STATEMENTS EXAMPLE
Workings
1- Irrecoverable debts £
Previous allowance
New allowance (SOFP)
Increase
Per trial balance
Income Statement
2- Depreciation
Property
Opening Acc Dep
Dep for the year
Closing Acc Dep (SOFP)
Equipment
Opening Acc Dep
Dep for the year
Closing Acc Dep (SOFP)
Tom John
Income Statement for the Year Ended 31 May 2019
£ £
Sales
Cost of sales:
Opening inventory
Purchases
Purchases returns
Closing inventory
Gross profit
Expenses:
Wages and salaries
Irrecoverable debts (W1)
Loan interest
Depreciation expense (W2)
Other operating expenses
Tom John
Statement of Financial Position as at 31 May 2019
Accumulated Carrying
Cost depn. value
£ £ £
Non-current assets
Property
Equipment
Current assets
Inventory
Trade receivables (net of allowance for receivables)
Prepayments
Bank
Cash in hand
Total Assets
Capital
Balance at 1 June 2018
Net profit for the year
Drawings
Non-current liabilities
17% loan
Current liabilities
Trade payables
Accruals