Cambrige Notes: Principles of Account: Incomplete and Single Records Example 2

• Our first example on this topic was relatively straight forward
• We will now look at a more challenging and comprehensive example
• On how to create Financial Statements in cases where only single entry and incomplete records are kept

The Question

William Sachikonye runs a second-hand furniture business from a shop which he rents. He does not keep complete accounting records, but is able to provide you with the following information about his financial position at 1 April 20X8: Stock of furniture $3,210; Trade debtors $2,643; Trade creditors $1,598; Motor vehicle $5,100; Shop fittings $4,200; Motor vehicle expenses owing $432.
He has also provided the following summary of his bank account for the year ended 31 March 20X9:

All cash and cheques received were paid into the bank account immediately.
You find that the following must also be taken into account:

• Depreciation is to be written off the motor vehicle at 20% and off the shop fittings at 10%, calculated on the book values at 1 April 20X8 plus additions during the year
• At 31 March 20X9 motor vehicle expenses owing were $291 and insurance paid in advance was $177.
• Included in the amount paid for shop fittings were:
  a table bought for $300, which William resold during the year at cost,
  some wooden shelving (cost $250), which Smithson used in building an extension to his house.

Other balances at 31 March 20X9 were:

• Trade Debtors $4 012
• Trade Creditors $2 445
• Stock of furniture $4 063

Required:

1.  For the year ended 31 March 20X9
   1. calculate William’s sales and purchases,
   2. prepare his trading and profit and loss account.
2. Prepare William’s balance sheet as at 31 March 20X9.

Solution

• The first part of the solution to this question can be found here
• The second part of the solution can be found here

To access more topics go to the Principles of Accounting Notes.