- 20 Marks
FA – L1 – Q72 – Preparing financial statements of a sole trader
Prepare Zanko Ventures' statement of profit or loss for 20X9 using trial balance and adjustments.
Question
(a) Distinguish between capital expenditure and revenue expenditure.
(b) (i) The following trial balance was extracted from the books of Zanko Ventures, a second-hand bags dealer as at 31st December, 20X9.
| Description | DR (GH₵) | CR (GH₵) |
|---|---|---|
| Inventory | 120,000 | |
| Vehicle (Cost) | 150,000 | |
| Trade receivables | 25,000 | |
| Accumulated depreciation: Vehicle | 30,000 | |
| Accumulated depreciation: Furniture & fittings | 10,120 | |
| Trade payables | 100,000 | |
| Drawings | 120,000 | |
| General expenses | 65,000 | |
| Allowance for receivables | 2,500 | |
| Rate & rent | 14,000 | |
| Insurance | 5,000 | |
| Irrecoverable debt | 7,000 | |
| Discount received | 25,150 | |
| Discount allowed | 15,160 | |
| Bank balance | 165,240 | |
| Wages & salaries | 250,000 | |
| Sundry expenses | 6,150 | |
| Vehicle running expenses | 15,650 | |
| Furniture & fittings | 50,600 | |
| Repairs to the shop | 6,500 | |
| Purchases | 650,120 | |
| Sales | 1,079,130 | |
| Capital | 473,520 | |
| Total | 1,720,420 | 1,720,420 |
The following additional information is provided:
(i) Allowance for receivables is to be reduced by 10%.
(ii) Rate and rent has been paid in advance by two (2) months. Note that Zanko Ventures pays GH₵1,000 each month.
(iii) Inventory as at 31st December, 20X9 is GH₵80,150.
(iv) A bill of GH₵6,150 for vehicle running was outstanding as at 31st December, 20X9.
(v) The enterprise provides depreciation as follows:
- Vehicle: 20% per annum on straight-line basis.
- Furniture and fittings: 20% per annum on straight-line basis.
You are required to:
(i) Prepare the statement of profit or loss for the year ending 31st December 20X9.
(ii) Prepare the statement of financial position as at 31st December 20X9.
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