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QUESTION
Incomplete records
Mary Grimes, wholesale fruit and vegetable merchant, does not keep a full set of accounting records.
However, the following information has been produced from the business's records.
(a)
Summary of the bank account for the year ended 31 August 20X8
$
$
1 Sept 20X7 balance b/d
1,970
Payments to suppliers
72,000
Cash from trade receivables
96,000
Purchase of motor van (E471 KBR) 13,000
Sale of private yacht
20,000
Rent and local taxes
2,600
Sale of motor van (A123 BWA)
2,100
Wages
15,100
Motor vehicle expenses
3,350
Postage and stationery
1,360
Drawings
9,200
Repairs and renewals
650
Insurance
800
31 Aug 20X8 balance c/d
2,010
120,070
120,070
1 Sep 20X8 balance b/f
2,010
(b)
Assets and liabilities, other than balance at bank
1 Sep 20X7 31 Aug 20X8
$
$
Trade payables
4,700
2,590
Trade receivables
7,320
9,500
Rent and local taxes accrued
200
260
Motor vans:
A123 BWA:
At cost
10,000
–
Accumulated
depreciation 8,000
–
E471 KBR:
At cost
–
13,000
Accumulated
depreciation
–
To
be
determined
Inventory
4,900
5,900
Insurance prepaid
160
200
EXAM FOCUS POINT
Questions on incomplete records in your exam will usually be based on short scenarios. However, it is
well worth attempting the longer question below, as it will help you to really understand what is going
on in a set of financial statements. You may also need to use these techniques in one of the 15 mark
questions, either on this topic or on accounts preparation.
BPP Tutor Toolkit Copy
CHAPTER 17
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INCOMPLETE RECORDS
309
(c)
All receipts are banked and all payments are made from the business bank account.
(d)
A trade debt of $300 owing by John Blunt and included in the trade receivables at 31 August
20X8 (see (b) above) is to be written off as an irrecoverable debt.
(e)
Mary Grimes provides depreciation at the rate of 20% on the cost of motor vans held at the end of
each financial year. No depreciation is provided in the year of sale or disposal of a motor van.
(f)
Discounts received during the year ended 31 August 20X8 from trade payables amounted to
$1,100.
Required
(a)
Prepare Mary Grimes' statement of profit or loss for the year ended 31 August 20X8.
(b)
Prepare Mary Grimes' statement of financial position as at 31 August 20X8.
ANSWER
(a)
STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 AUGUST 20X8
$
$
Revenue (W1)
98,180
Opening inventory
4,900
Purchases (W2)
70,990
75,890
Less closing inventory
5,900
69,990
Gross profit
28,190
Discounts received
1,100
Profit on sale of motor vehicle ($2,100 – $(10,000 – 8,000))
100
29,390
Rent and local taxes (W3)
2,660
Wages
15,100
Motor vehicle expenses
3,350
Postage and stationery
1,360
Repairs and renewals
650
Insurance (W4)
760
Irrecoverable debt
300
Depreciation of van (20% × $13,000)
2,600
26,780
Profit for the year
2,610
(b)
STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 20X8
$
$
Assets
Non-current assets
Motor van: cost
13,000
depreciation
2,600
10,400
Current assets
Inventory
5,900
Trade receivables ($9,500 – $300 irrecoverable debt)
9,200
Prepayment
200
Cash at bank
2,010
17,310
Total assets
27,710
Capital and liabilities
Capital account
Balance at 1 September 20X7 (W5)
11,450
Additional capital: proceeds on sale of yacht
20,000
Profit for the year
2,610
BPP Tutor Toolkit Copy
PART F: PREPARING BASIC FINANCIAL STATEMENTS
310
$
$
Less drawings
(9,200)
Balance at 31 August 20X8
24,860
Current liabilities
Trade payables
2,590
Accrual
260
2,850
Total capital and liabilities
27,710
Workings
1
Revenue (sales)
$
Cash received from customers
96,000
Add trade receivables at 31 August 20X8
9,500
105,500
Less trade receivables at 1 September 20X7
7,320
Sales in year
98,180
2
Purchases
$
$
Payments to suppliers
72,000
Add trade payables at 31 August 20X8
2,590
discounts granted by suppliers
1,100
3,690
75,690
Less trade payables at 1 September 20X7
4,700
70,990
3
Rent and local taxes
$
Cash paid in year
2,600
Add accrual at 31 August 20X8
260
2,860
Less accrual at 1 September 20X7
200
Charge for the year
2,660
4
Insurance
$
Cash paid in year
800
Add prepayment at 1 September 20X7
160
960
Less prepayment at 31 August 20X8
200
760
Workings 1 to 4 could also be presented in ledger account format as follows.
TRADE RECEIVABLES
$
$
Balance b/d
7,320
Bank
96,000
Sales
98,180
Balance c/d
9,500
105,500
105,500
TRADE PAYABLES
$
$
Bank
72,000
Balance b/d
4,700
Discounts received
1,100
Purchases
70,990
Balance c/d
2,590
75,690
75,690
BPP Tutor Toolkit Copy
CHAPTER 17
//
INCOMPLETE RECORDS
311
RENT AND LOCAL TAXES
$
$
Bank
2,600
Balance b/d
200
Balance c/d
260
P/L charge
2,660
2,860
2,860
INSURANCE
$
$
Balance b/d
160
P/L charge
760
Bank
800
Balance c/d
200
960
960
5
Capital at 1 September 20X7
$
$
Assets
Bank balance
1,970
Trade receivables
7,320
Motor van $(10,000 – 8,000)
2,000
Inventory
4,900
Prepayment
160
16,350
Liabilities
Trade payables
4,700
Accrual
200
4,900
11,450
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