FA – L1 – Q92 – Preparation of accounts from incomplete records

Calculate sales for Iridescent's business for 20X9 using incomplete records and a 40% mark-up

Question

Iridescent is a sole trader. She does not keep a full set of accounting records but does keep some records of transactions and documents. She has asked you to prepare her accounts for the year ended 31 December 20X9.
You have been given a list of the assets and liabilities of the business at the start and end of the year.

Assets and liabilities

	At 1 Jan 20X9	At 31 Dec 20X9
	GH₵000	GH₵000
Trade receivables	5,500	6,100
Trade payables	2,800	3,500
Inventory	10,400	?

Iridescent has no idea what her inventory value was at 31 December as she did not count or value her inventory at the year end.
She has also given you a summary of her bank statements for the year.

Summary of bank statements

	Receipts		Payments
	GH₵000		GH₵000
1 Jan	Balance b/d	1,620	To suppliers
Bankings		65,400	For expenses
			Living expenses
			31 Dec Balance c/d

You have also been able to gather the following information from Iridescent:
i) Iridescent banks her takings from the till each week but before doing so pays GH₵50,000 to her employees and takes GH₵30,000 herself. The business operates for 50 weeks each year.
ii) The till always has a cash float of GH₵100,000.
iii) The sales of the business are both cash and credit sales and are all made at a mark-up of 40%.

Required:
(a) Calculate sales for the year.

(b) Calculate the value of the closing inventory at 31 December 20X9.

Answer

(A) Cash account

	GH₵000		GH₵000
Opening balance	100	Employees	2,500
Cash sales (bal fig)	69,500	Iridescent	1,500
		Bankings	65,400
		Closing balance	100
	69,600		69,600

Total receivables account

	GH₵000		GH₵000
Balance b/d	5,500	Bank	65,400
Sales (bal fig)	66,000	Balance c/d	6,100
	71,500		71,500

Total sales = Cash sales + Credit sales
= 69,500 + 66,000
= 135,500 (GH₵000)

(B)

Total payables

	GH₵000		GH₵000
Bank	42,800	Balance b/d	2,800
Balance c/d	3,500	Purchases (bal fig)	43,500
	46,300		46,300

Cost of sales = (Sales ÷ 140) × 100
= (135,500 ÷ 140) × 100
= 96,786 (GH₵000)

Cost of sales = Opening inventory + Purchases – Closing inventory
96,786 = 10,400 + 43,500 – Closing inventory
Closing inventory = 10,400 + 43,500 – 96,786
= 53,900 – 96,786
= -42,886 (GH₵000)

Tags: Closing Inventory, Incomplete records, Mark-up, Payables, Sole Trader
Level: Level 1

Topic: Preparation of accounts from incomplete records

Uploader: Samuel Duah