I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

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(c) 

Cash sales and credit sales together totalled $27,250. 

(d) 

Outstanding trade accounts receivable balances at 31 January 20X6 amounted to $3,250, of 

which $250 were to be written off. 

(e) 

An allowance for receivables is to be made equivalent to 2% of the remaining outstanding 

receivables. 

(f) 

Cash payments were made in respect of the following expenses. 

 

 

$      

(i) 

Stationery, postage and wrapping 

500 

(ii) Telephone 

charges 

200 

(iii) Electricity 

600 

(iv) 

Cleaning and refreshments 

150 

(v) Suppliers 

8,000 

(g) 

Cash drawings by the proprietor, Alf Newbegin, amounted to $6,000. 

(h) 

The outstanding overdraft balance as at 1 August 20X5 was paid off. Interest charges and bank 

charges on the overdraft amounted to $40. 

Alf Newbegin knew the balance of cash in hand at 31 January 20X6 but he wanted to know if the 

business had made a profit for the six months that it had been trading, and so he asked his friend, Harry 

Oldhand, if he could tell him. 

Required 

Prepare the statement of profit or loss of Newbegin Tools for the six months to 31 January 20X6 and a 

statement of financial position as at that date. 

ANSWER 

NEWBEGIN TOOLS 

 

 

STATEMENT OF PROFIT OR LOSS FOR THE SIX MONTHS ENDED  

31 JANUARY 20X6 

 

 

 

$ 

$ 

Revenue 

 

 

27,250 

Opening inventories 

 

12,000 

 

Purchases  

 

 10,000 

 

 

 

22,000 

 

Less closing inventories 

 

  5,450 

 

Cost of goods sold 

 

 

16,550 

Gross profit 

 

 

10,700 

Electricity  

 

600 

 

Stationery, postage and wrapping 

 

500 

 

Irrecoverable debts written off 

 

250 

 

Allowance for receivables* 

 

60 

 

Telephone charges 

 

200 

 

Cleaning and refreshments 

 

150 

 

Interest and bank charges 

 

      40 

 

 

 

 

 1,800 

Profit for the period 

 

 8,900 

* 2% of $3,000 = $60. 

The preparation of a statement of financial position is more complex, because we must calculate the 

value of trade payables and cash in hand. 

BPP Tutor Toolkit Copy

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CHAPTER 12  

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  IRRECOVERABLE DEBTS AND ALLOWANCES