Financial Statements of Sole Traders 2023

Q.1 The ledger accounts of Janey Lee, a trader, as at 31st December 20X8 before any adjustments have
been made to them, are as follows.

Shop furniture: at cost --------------------------------------- $ 9,000 $

Depreciation allowance at 1.1.X8 450
Premises at cost ---------------------------------------------- 56,000
Depreciation allowance at 1.1.X8 2,800
Inventory at 1.1.X8 ---------------------------------------------- 117,000
Receivables at 31.12.X8 240,750
Allowance for receivables at 1.1.X8 ---------------------------- 4,320
Cash in hand 120
Cash at bank ------------------------------------------------------- 18,300
Payables for supplies 292,500
Proprietor's capital at 1.1.X8 ------------------------------------- 120,000
Purchases 459,000
Sales ---------------------------------------------------------------- 580,000
Salaries 81,900
Advertising ------------------------------------------------------- 10,350
Local taxes for 15 months to 31.3.X9 6,750
Bank charges ------------------------------------------------------- 900

The adjustments Janey Lee needs to make to her accounts are as follows:

i. Depreciation of shop furniture $450

ii. Depreciation of premises $2,800
iii. A debt of $2,250 is irrecoverable and is to be written off and the receivable allowance is to be
increased to 2% of the year end receivables figure
iv. The inventory at 31st December 20X8 is valued at $135,000
v. On 31st December 20X8. $540 was owed for advertising expenses but an invoice has not yet
been received.

Required:
i. Prepare Profit and Loss statement for the year ended 31st December 20X8 (33,960)
ii. Balance sheet as at 31st December 20X8 (447,000)

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 Financial Statements of Sole Traders 2023

Q.2
Stephen Chee
Trial Balance
As at 31st May 20X1
$ $
Property at cost ----------------------------------------------- 120,000
Equipment at cost 80,000
Allowance for depreciation (as at 1st June 20X0)
On property ------------------------------------------------- 20,000
On equipment 38,000
Purchases -------------------------------------------------------- 250,000
Sales 402,200
Inventory as at 1st June 20X0 -------------------------------------- 50,000
Rent expense 18,000
Discount received ----------------------------------------------- 4,800
Purchase return 15,000
Wages and salaries ----------------------------------------------- 58,800
Irrecoverable debts 4,600
Loan interest -------------------------------------------------------- 5,100
Other operating expenses 17,700
Accounts payables ----------------------------------------------- 36,000
Accounts receivable 38,000
Cash in hand -------------------------------------------------------- 300
Bank 1,300
Drawings -------------------------------------------------------- 24,000
Allowance for receivable 500
17% long term loan ----------------------------------------------- 30,000
Capital, as at 1st June 20X0 121,300

The following additional information as at 31st May 20X1 is available:

i. Inventory as at the close of business has been valued at cost at $42,000

ii. Wages and salaries need to be accrued by $800
iii. Other operating expenses are prepaid by $300
iv. The allowance for receivables is to be adjusted so that it is 2% of accounts receivables.
v. Depreciation for the year ended 31st May 20X1 has still to be allowed for as follows.
a. Property: 15% per annum using the straight line method; and
b. Equipment: 25% per annum using the reducing balance method

Required:
Prepare Profit and Loss statement for the year ended 31st May 20X1 $30,540
Balance sheet as at 31st May 20X1 $194,640

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 Financial Statements of Sole Traders 2023

Q.3 The following trial balance has been extracted from the accounts of Brenda, a sole trader.

Brenda
Trial balance as at 30 June Year 6
DR CR
$ $
Sales 428,000
Sales returns 2,000
Purchases 302,000
Purchase returns 1,000
Carriage inwards 500
Carriage outwards 900
Wages and salaries 64,000
Rent 14,000
Heating and lighting 5,000
Inventory as at 1 July Year 5 15,000
Drawings 22,000
Provision for doubtful debts 4,000
Equipment – at cost 102,000
Motor vehicles – at cost 44,000
Accumulated depreciation:
– equipment 22,500
– motor vehicles 9,000
Trade receivables 51,000
Trade payables 42,000
Bank OD 3,300
Sundry expenses 8,500
Cash 500
Capital as at 1 July Year 5 121,600

The following additional information as at 30 June Year 6 is also available.

 $400 is owed for heating and lighting expenses.
 $700 has been prepaid for rent.
 It is decided that a bad debt of $1,200 should be written off, and that the
allowance for doubtful debts should be increased to $4,500.
 Depreciation is to be provided for the year as follows:
− Equipment – 10% on cost
− Motor vehicles – 20% on cost.
 Inventory at 30 June Year 6 was valued at $16,500.

Required: Prepare Brenda’s income statement for the year ended 30 June Year 6 and her statement of
financial position as at that date. $13,200 $158,500

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 Financial Statements of Sole Traders 2023

Q.4 The following balances were extracted from the main ledger of SWAN at 31 December Year 7.

$ $
Capital -------------------------------------------------------- 10,059
Inventory at 1 January Year 7 ------------------------------------ 2,720
Cash in hand --------------------------------------------------------- 55
Bank overdraft --------------------------------------------------------- 2,522
Accounts receivables --------------------------------------------------------- 7,009
Accounts payables --------------------------------------------------------- 6,735
Motor vans (Cost $2,000) ----------------------------------------------- 1,500
Drawings in cash --------------------------------------------------------- 2,459
Furniture (Cost $4,000) ----------------------------------------------- 3,800
Purchases --------------------------------------------------------- 33,436
Allowance for receivable ------------------------------------- 162
Sales --------------------------------------------------------- 50,261
Purchases returns ---------------------------------------------------------- 120
Carriage inwards ---------------------------------------------------------- 546
Salaries and wages ---------------------------------------------------------- 5,226
Rent ---------------------------------------------------------- 626
Insurance expense ---------------------------------------------------------- 65
Carriage outwards ---------------------------------------------------------- 720
Motor vehicle expenses ------------------------------------------------------- 920
Irrecoverable debts ---------------------------------------------------------- 240
Interest on bank overdraft---------------------------------------------------- 56
Discounts received ---------------------------------------------------------- 59
Returns inwards ---------------------------------------------------------- 240
Land --------------------------------------------------------- 10,300

You are given the following information:

(1) The inventory at 31 December Year 7 was $4,270.
(2) Wages and salaries payable at 31 December Year 7 were $426.
(3) Rent paid in advance at 31 December Year 7 amounted to $100.
(4) The allowance for irrecoverable debts is to be increased to $260.
(5) Depreciation is to be charged as follows: motor vans at 25% per year on cost, fixtures and fittings 5% per
year on cost.
(6) During Year 7, the owner of SWAN withdrew goods valued at $180 for his own use. No entry has been
made in the accounts for the withdrawal of these goods.
(7) One quarter of the motor vehicle expenses is the cost of the owner’s private motoring, as distinct from
expenses for business purposes.

Required:
Prepare Profit & Loss statement for the year ending on 31 December Year 7 and a statement of financial
position as at that date. 9,201 26,074