Final Accounts of Limited Liability Companies

 

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In today’s class, we will be talking about the final accounts of limited liability companies. Enjoy the class!

Final Accounts of Limited Liability Companies

Final Accounts of Limited Liability Companies | classnotes.ng

The final accounts of limited liability companies comprise the following:

  1. Trading, Profit and Loss Account.
  2. Appropriation Account.
  3. Balance Sheet.

Format of Trading Profit & Loss account

Trading Profit & Loss account for the year ended 31/12/9x

Opening Stock                         x                      Stock                                      x

Add purchases                         x                                  Less return inward              x

Less return outward     x          x                      Gross loss                              x

Cost of goods available        x

Less closing stock                     x

Cost of sales                              x

Gross profit c/d                         x

X                                                                      x

Expenses                                                          Gross profit b/d                  x

Wages & salaries                      x                      Income from quoted In. x

Rent & Rate                               x                      Rent receivable                  x

Depreciation of assets            x                      Discount received             x

Directors remuneration          x                      Other incomes                    x

Auditors remuneration           x                                                                      x

Advertising                                 x

Hire of plant                               x

Debenture interest                   x

Insurance                                   x

Other expenses            x

Net profit                                    x

X                                                                      x

 

Appropriation account

Corporate tax                           x          Balance b/f from last year                      x

General reserve                        x          Net profit b/d                                              x

Revenue reserve                      x

Dividend interim                       x

Proposed dividend                 x

Goodwill written off                x

Retained profit c/d                  x

X                                                                                  x

Balance sheet format

Authorized capital                              N                     Fixed asset

Cost   Dep.   NBN

Ordinary share @ N1 each                x                      Land & build   X     (x)       X

10% Preference Share @ N 1 each x                      Furniture          x        (x)       x

X                      Machinery       x      (x)       x

Issued share capital                                                  Premises          x        (x)       x

Ordinary share @ N 1 each               x                      Goodwill                               x

10% preference share @ N 1 each  x                      investments

Reserves                                                                         Quoted         x

Share premium                         x                                  Unquoted     x

General reserve                        x                                  Current assets x

Retained profit                          x                                  Stock              x

Capital redemption reserve x                                  Debtors         x

Long-term liabilities                                                    Cash              x

10% Debenture                         x                                  Bank               x

Current liabilities                                                           Bill receivable x

Bill payable                    x                                              Prepayment            x

Income in advance    x                                              Accrued income   x          x

Corporate tax               x                                              Preliminary expenses        x

Creditors                         x

Proposed dividend     x

Accruals                         x          x

X                                                                                  x

Evaluation

  1. List five items that feature in the Appropriation Account of a limited liability company.
  2. Explain the following terms:
  3. Debentures
  4. Authorised share capital
  5. Issued capital
  6. Proposed dividend
  7. Revenue reserve

Illustration

The following Trial Balance was extracted from the books of Johnson Nigeria Limited as at 31st December 1990.

Dr Cr
Issued and fully paid 20,000 shares of ₦1 each 20,000
Share premium 10,000
General reserve 8,000
Profit and loss account 3,000
Stock 1/1/90 8,000
Salaries and wages 5,000
Discount 200 400
Carriage inwards 160
Loans 24,000
Interest on loan 1,000
Carriage outwards 560
Provision for bad depth 2,000
Preliminary expenses 12,000
Motor vehicle expenses 1,800
Director’s salaries 6,000
Repairs to premises 250
Rates 1,600
Premises at cost 20,000
Motor vehicle at cost 23,000
Plants and machinery cost 25,000
Purchases and sales 45,000 91,740
Provisions for depreciation
Plants and machinery 2,500
Debtors & creditors 12,390 8,000
Sundry expenses 3,500
Cash in hand 300
Cash in bank 4,000
Returns 240
170.000 170,000

Additional information

  • Stock at close ₦12,500
  • Expense unpaid: motor expenses – ₦ 20

Insurance          – ₦ 450

Sundry experiences – ₦400

  • Prepaid expenses:   Rate                       – ₦ 320

Sundry expenses    – ₦ 250

  • Provision for bad debts to be increased to – ₦2,800
  • Part of the premises is sublet at ₦2,400 per annum
  • Bad debts at 31st December, ₦600
  • Monthly salaries and wages bill ₦400
  • Loan interest is 5% per annum
  • Provide for depreciation on a straight-line method: premises 2% ,plant & machinery 25%,motor vehicle 10%
  • Write off preliminary expenses
  • Transfer to general reserves ₦5,000 and ₦5,000 to revenue reserve.

Prepare :

  • Trading, Profit and Loss and Appropriation Account of the year ended 31st December 1990
  • a Balance Sheet as at that date.

Solution:

Johnson Nigeria Limited

Trading, profit and loss for the year ended 31st December 1990

Opening stock 8,000 Sales 91,740
Add purchases 45,000 Less return inward (240)
Add carriage inwards 160 91,500
45,160
Less returns outward (360) 44,800
Costs of goods available 52,800
Less closing stock (12,500)
Cost of good sold 40,300
Gross profit c/d 51,200
91,500 91,500
Operational expenses Gross profit b/d 51,200
Discount allowed 200 Discount received 400
Salaries and wages(400×12) 4,800 Rental income 2,400
Carriage outwards 560
Interest on loan(0.05×24,000) 1,200
Motor on vehicle exp.(1,800+200) 2,000
Director’s salaries 6,000
Repairs to premises 250
Rates (1,600-320) 1,280
Provision of depreciation
Premises (0.02×20,000) 400
Plant and machinery(0.25×25,000) 6,250
Motor vehicle (0.1×23,000) 2,300
Sundry expenses(3,500 + 400)=
3,900 – 250 3,650
Insurance 450
Bad debts 600
Provision for bad debts 800
Net profit c/d 23,260
26,260 26,260
General reserves 5,000 Net profit b/d 23,260
Revenue reserves 5,000 Profit brought forward 3,000
Preliminary expenses written off 12,000
Undistributed profit c/d 4,260
26,260 26,260

The balance sheet as at 31st December 1990

Authorized share capital               ₦  

Fixed assets                                               ₦

20,000 ordinary shares of ₦1 each 20,000 Cost Dep. NBC
Issued share capital Premises 20.000 (400) 19,600
20,000 ordinary shares for ₦1 each 20,000 Motor vehicle 23,000 (2,300) 20,700
Plant and machinery 25,000 (8,750) 16,250
Reserves Current Assets
General reserves(5000+8,000) 13,000 Cash in hand 300
Revenue reserves 5,000 Debtors (12,390 – 600)=
 

Share premium

10,000  

11,790 – 2,800

8,990
Retained profit 4,260 Stock 12,500
Long term liabilities Bank 4,000
Loans 24,000 Rent  receivable 2,400
Current liabilities Prepaid : Rates 320
Creditors 8,000 Sundry expense 250
Loan interest owing 200 Wages and salaries 200
Motor expenses owing 200
Insurance accrued 450
Sundry expenses owing 400
85,510 85,510

 Evaluation

  1. What is fixed assets and give five examples of fixed assets.
  2. Define intangible assets and mention three examples
General evaluation
  1. List five methods of providing for depreciation of fixed assets.
  2. State five reasons for making provision for depreciation of fixed assets.
  3. List eight errors that will affect the agreement of the trial balance.
  4. Give five reasons for preparing departmental accounts.
  5. List and explain five classifications of the Ledger.

Reading assignment

Essential Financial Accounting page 265-282

Weekend assignment

  1. Net purchase in the trading account is —————- (a)purchases –return outwards (b) purchases – return inward (c)purchases – carriage inwards (d) purchases – sales
  2. Net sales in the trading account is ————– (a)purchases – sales  (b)sales – return inwards (c)sales – return outwards (d) sales + purchases
  3. Working capital is ————— (a)current assets – current liabilities ( b) current liabilities – current assets  (c) total current assets (d) current assets + stock
  4. Capital owned is ————— (a)current assets – total liabilities (b) total assets – total liabilities (c) total assets + total capital (d) current assets + stock
  5. Capital employed is ———– (a)total assets – current liabilities (b)total assets – total liabilities (c ) total liabilities + all assets (d) current assets + current liabilities

 Theory

  1. What is a bonus issue?
  2. Enumerate five features of a private limited company.

 

In our next class, we will be talking about the Issue of Shares and Debentures.  We hope you enjoyed the class.

Should you have any further question, feel free to ask in the comment section below and trust us to respond as soon as possible.

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