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

 

 

8

   Practice question 

Now work through this example to give you practice in preparing financial statements in accordance with 

IAS 1.  

Note that very little detail appears in the statement of profit or loss – all items of income and expenditure 

are accumulated under the standard headings. Write out the standard proformas and then go through the 

workings, inserting figures as you go. 

BPP Tutor Toolkit Copy

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PART F: PREPARING BASIC FINANCIAL STATEMENTS 

 

368

 

QUESTION 

USB

 

USB, a limited liability company, has the following trial balance at 31 December 20X9. 

 

Dr 

Cr 

 

$'000 

$'000 

Cash at bank 100 

 

Inventory at 1 January 20X9 

2,400 

 

Administrative expenses 

2,206 

 

Distribution costs 

650 

 

Non-current assets at cost: 

 

 

   Buildings 

10,000 

 

   Plant and equipment 

1,400 

 

   Motor vehicles 

320 

 

Suspense 

 

   1,500 

Accumulated depreciation 

 

 

   Buildings 

 

   4,000 

   Plant and equipment 

 

      480 

   Motor vehicles 

 

      120 

Retained earnings 

 

      560 

Trade receivables 

876 

 

Purchases 4,200 

 

Dividend paid 

200 

 

 

 

Dr 

Cr 

 

$'000 

$'000 

Sales revenue 

 

 11,752 

Sales tax payable 

 

   1,390 

Trade payables 

 

   1,050 

Share premium 

 

      500 

$1 ordinary shares 

             

   1,000 

 

 22,352 

 22,352 

The following additional information is relevant. 

(a) 

Inventory at 31 December 20X9 was valued at $1,600,000. While doing the inventory count, 

errors in the previous year's inventory count were discovered. The inventory brought forward at the 

beginning of the year should have been $2.2m, not $2.4m as above. 

(b) 

Depreciation is to be provided as follows. 

(i) 

Buildings at 5% straight line, charged to administrative expenses 

(ii) 

Plant and equipment at 20% on the reducing balance basis, charged to cost of sales 

(iii) 

Motor vehicles at 25% on the reducing balance basis, charged to distribution costs 

(c) 

No final dividend is being proposed. 

(d) 

A customer has gone bankrupt owing $76,000. This debt is not expected to be recovered and an 

adjustment should be made. An allowance for receivables of 5% is to be set up. 

(e) 

1m new ordinary shares were issued at $1.50 on 1 December 20X9. The proceeds have been left 

in a suspense account. 

Required 

Prepare the following. 

(a) 

Statement of profit or loss for the year ended 31 December 20X9