Final Accounts – Working Exercises

 

Welcome to class! 

In today’s class, we will be talking about the final accounts – working exercises. Enjoy the class!

Final Accounts – Working Exercises

Final Accounts | classnotes.ng

Illustration:

The following trial balance has been extracted from the ledgers of Mr Johnson as at 31st December, 2003.

                                                                               DR                       CR

                             

Purchases / Sales                                                               142,448                      233,120

Returns                                                                                      5,000                          3,000

Discounts                                                                                  2,412                          1,368

Debtors /Creditors                                                               38,600                        23,280

Furniture and Fittings                                                                         5,000

Carriage inwards                                                                   2,500

Carriage outwards                                                                            5,176

5% Loan from Co-operative Society                                                                              15,000

Drawings                                                                                     862

Land and Buildings                                                                          40,000

Rents, Rates and Insurance                                                          11,946

Postages and Stationery                                                     2,426

Motor Vehicles                                                                     20,000

Advertising                                                                               3,704

Provision for doubtful debts                                                                                                   500

Salaries and Wages                                                                         26,152

Bad Debts                                                                                2,468

Cash in Hand                                                                                         624

Cash at Bank                                                                                       6,108

Stock as at 1st January 2003                                                        14,308

Equipment at cost                                                               97,400

Accumulated depreciation on Equipment                                                                 43,300

Capital                                                                                                                                  107,566

427,134                      427,134

Additional Information:

(a)      Stock at close N16,442

(b)      Outstanding expenses:

Advertising                           N354

Salaries and wages           N848

Interest on loan                  N750

(c)       Rent, Rates and Insurance paid in advance N426

(d)      Depreciation:

Equipment 10% on the cost

Furniture and Fittings 5%

Land and Buildings 10%

Motor Vehicles 25%

(e)       Salaries and wages include N3,600 paid to Mr Johnson.

(f)        Records to typewriter bought on credit on 31st December 2003 for N10,000 have not been made in the books.

(g) Mr Johnson decided on 31st December 2003 to write off a further amount of N2,000 as bad debt.

(h) Mr Johnson’s children consumed goods worth N5,500 during the year.

(i)        Provisions for doubtful debts 5%: discount allowance 10%

 

Prepare:

  1. Trading, Profit and Loss Account for the year ended 31st December 2003.
  2. A Balance Sheet as at that date.

 

EVALUATION

  1. Explain the following: (a)      Cost of goods available for sale (b) Cost of goods sold (c) Gross profit
  1. Write short notes on the following: (a)      Intangible assets  (b) Wasting assets

Solution

Mr Johnson

Trading Profit and Loss Account for the year ended 31st December 2003

₦             ₦                                                            ₦         ₦

Opening Stock                                    14,308       Sales                               233,120

Add: Purchases                  142,448                      Less: returns inwards   5,000

228,120

Add: Carriage inwards   2,500

144,948

Less: children consumption   5,500

139,448

Less: returns outwards        3,000    136,448

150,756

Less:Closing stock          16,442

Cost of Goods Sold                            134,314

Gross Profit c/d                                     93,806

228,120                                     228,120

 

Discount Allowed                                  2,412        Gross Profit                   93,806

Carriage outwards                                    5,176     Discount Received                         1,368

Postage & Stationery                                2,426

Rent, Rates & Insurance (11,946-426) 11,520

Advertising (3,704 + 354)                          4,058

Salaries & Wages (26152 + 848 – 3600) 23,400

Loan interest accrued                                 750

Increase in provision for doubtful debt 1,330

Provision for discounts allowed

(10/100 x (36,600 – 1830)                         3,477

Bad debts: 2468 + 2000                            4,468

Depreciation:

Equipment               9,740

Land and Building 4,000

Motor Vehicle         5,000

Furniture and fittings  250        18,990

 

Net Profit                                                  17,167

95,174                                                     95,174

 

 

Balance Sheet as at 31st December 2003

                 FIXED ASSETS         Cost Dep.    NBV Capital             107,566                                                   N                                                                  N         N

Add Net Profit                     17,167Land & Building      40,000         4,000     36,000

124,733          Motor Vehicles       20,000         5,000    15,000

Furniture & fittings   5,000              250     4,750

Less: Drawings

(5,500 + 3,600 + 862)     9,962      Equipment               107,400          53,040    54,360

114,771                                              172,400          162,290   110,110

 

CURRENT LIABILITIES:                 CURRENT ASSETS:

5% Co-operative loan 15,000     Stock              16,442

Creditors                         23,280      Debtors                     38,600

Creditors for Typewriter      10,000      less: Bad Debts          2,000

Outstanding Expenses:                                                     36,600

Interest on loan      750                 less: Provision for

Salaries & wages    848                 doubtful debts        1,830

Advertising               354                                                     34,770

50,232            less: Provision for

discounts allowed   3,477           31,293

 

Insurance Prepaid                           426

Cash at Bank                                   6,108

Cash in Hand                                     624

54,893

165,003                                              165,003

GENERAL EVALUATION
  1. Explain the following types of accounts and in each case, state the rules regarding the recording of transactions in their debit and credit sides: (a) personal accounts (b) real accounts (c) nominal accounts (d) liabilities account (e) asset account
  2. State seven reasons why an accountant will consider end – of – year adjustments while preparing the final accounts
  3. State five differences between bookkeeping and accounting
  4. List seven source documents that are used in preparing the cash book
  5. Explain five differences between a trial balance and a balance sheet

 

In our next class, we will be talking about Single Entry and Incomplete Records.  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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