FA – L1 – Q39 – Preparing financial statements of a sole trader

JOHNNY
Johnny is in business as an antique dealer. The trial balance of his business at 1 January 20X9 was as follows.

Dr GH₵(000) Cr GH₵(000)
Capital 5,000
Cash 4,200
Motor van 600
Trade payable – A 200
Trade receivable – B 300
Rates prepaid 100
5,200 5,200

Cash transactions during the period to 31 March 20X9 were

GH₵(000)
Purchases 2,000
Revenue 3,000
Drawings 500
Motor running expenses 350
Rates 250

At 31 March inventory was GH₵700,000 and rates paid in advance amounted to GH₵150,000.

Required
(a) Prepare the trial balance at 31 March 20X9.

(b) Prepare the statement of profit or loss for the period to 31 March 20X9 and a statement of financial position at that date.

JOHNNY
(a) Trial balance at 31 March 20X9

Dr GH₵(000) Cr GH₵(000)
Capital 5,000
Cash at bank (W) 1,100
Motor van 600
Trade payable – A 200
Trade receivable – B 300
Rates 200
Purchases 2,000
Revenue 3,000
Drawings 500
Motor running expenses 350
WORKING
Bank a/c
GH₵(000)
Balance b/d 4,200 Purchases a/c
Revenue a/c 3,000 Drawings a/c
Motor running expenses a/c
Rates a/c
Balance c/d
7,200

JOHNNY
(b) Statement of profit or loss for the period to 31 March 20X9

GH₵(000)
Revenue 3,000
Less: Cost of sales
Purchases 2,000
Less: Closing inventory (700)
1,300
Gross profit 1,700
Less: Expenses
Motor running expenses 350
Rates (100 + 250 – 150) 200
550
Net profit 1,150

Statement of financial position at 31 March 20X9

GH₵(000)
Non-current assets
Motor van 600
Current assets
Inventory 700
Trade receivables 300
Prepayment 150
Cash 1,100
2,250
Total assets 2,850
Capital account
At 1 January 5,000
Add Net profit for the period 1,150
6,150
Less Drawings (500)
5,650
Current liabilities
Trade payables 200
Total capital and liabilities 5,850