- 15 Marks
FA – L1 – Q69 – Preparing financial statements of a sole trader
Prepare Sarah's statement of profit or loss for 20X8 and financial position as at 31 Dec 20X8 using given balances and adjustments.
Question
The following information relates to the business of Sarah for the year ended December 20X8.
| GH$ | GH$ | |
|---|---|---|
| Capital account, 1 January 20X8 | 13,640 | |
| Freehold properties at cost | 7,500 | |
| Furniture and fittings at cost | 2,000 | |
| Motor cars at cost | 6,300 | |
| Accumulated depreciation to 1 January | ||
| Freehold properties | 450 | |
| Furniture and fittings | 800 | |
| Motor cars | 2,370 | |
| Inventory 1 January | 6,740 | |
| Purchases | 54,520 | |
| Sales | 79,060 | |
| Salaries | 8,760 | |
| Rates | 1,170 | |
| Office expenses | 3,950 | |
| Motor expenses | 3,790 | |
| Drawings | 4,800 | |
| Allowance for receivables 1 January | 600 | |
| Loan | 4,000 | |
| Trade receivables | 9,240 | |
| Trade payables | 10,040 | |
| Bank balance | 2,190 | |
| 110,960 | 110,960 |
You are also supplied with the following information:
(1) Inventory at 31 December 20X8 was GH$7,330.
(2) Rates paid in advance at 31 December 20X8 amounted to GH$250.
(3) Allowance for receivables is to be made equal to 5% of accounts receivable at 31 December 20X8.
(4) Depreciation is to be provided for the year at the following annual rates calculated on cost at the year end:
- Freehold properties: 1%
- Furniture and fittings: 10%
- Motor cars: 20%
(5) Interest on the loan at 5% per annum is to be provided.
Required:
Prepare a statement of profit or loss for the year ended 31 December 20X8 and a statement of financial position at that date.
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