[Solutions Manual]

18. The Extended Trial Balance and Final

Financial Statements (Advanced)
18.1 a & b Jock
WORKING 1 RATES
Rates paid = 300 this equals 15 months therefore the three months to 31 March
20X5 are prepaid.
300 x 3/15 = 60
Rates a/c

31/12/X4

Bal per TB

300

31/12/X4
31/12/X4

Closing prepayment
P/L a/c

300

60
240
300

WORKING 2- MOTOR CAR DEPRECIATION

Cost x Rate as straight line
10,000 x 20% = 2,000
Profit or loss account charge is the 2,000
The allowance for irrecoverable receivables now changes to 4,000
WORKING 3 IRRECOVERABLE RECEIVABLES AND ALLOWANCE FOR
IRRECOVERABLE RECEIVABLES
Write the irrecoverable receivables off first. Then the allowance for discounts is
determined and lastly the allowance for irrecoverable receivables .
Trade receivables a/c
31/12/X4

Bal per TB

5,000

Bal b/d

5,000
4,000

31/12/X4
31/12/X4

Irrec. Recs a/c

Bal c/d

1,000
4,000
5,000

A profit or loss expense account for irrecoverable receivables of 1,000 has to be

included in the trial balance (only one entry) and subsequent statement of profit or
loss.

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward

[Solutions Manual]
Allowance for discounts a/c
31/12/X4

Reduction in
discounts a/c (P/L
a/c)

100

31/12/X4

100

Bal b/d

100

100

Allowance for irrecoverables is now 10% of closing trade receivables which is the
4,000 x 10% = 400. Therefore the closing balance on the allowance should be
400. So an increase of 150 is required.
Allowance for Irrecoverable receivables a/c
31/12/X4

Bal c/d

400

31/12/X4
31/12/X4

Bal b/d
Inc in allow (P/L)

400
Bal b/d

250
150
400
400

At the end of this, three profit or loss expense accounts have to be posted.
Irrecoverable receivables 1,000
Decrease in the allowance for discounts 100
Increase in the allowance for irrecoverable receivables 150

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward

[Solutions Manual]
Statement of profit or loss account for Jock for the year ended 31 December
20X5

Sales revenue
10,000
Cost of sales
Opening inventory
100
Purchases
2,000
2,100
Closing inventory
(500)
1,600
Gross profit
8,400
Less: expenses
Rent
200
Rates
240
Motor vehicle depreciation
2,000
Increase in allowance for irrecoverable receivables
150
Reduction in allowance for discounts
(100)
Irrecoverable receivables
1,000
3,490
Profit for the period
4,910
Statement of financial position for Jock as at 31 December 20X5

ASSETS
Non-current assets
Cost
Depn
NBV
Motor Vehicle
10,00
4,000
6,000
0
10,00
4,000
6,000
0
Current assets
Inventories
500
Trade receivables
4,000
Allowance for irrec. Receivables
(400)
3,600
Prepayments
60
Bank
5,000
9,160
Total assets
15,160
EQUITY AND LIABILITIES
Owners equity capital
Capital
9,250
Profit for the year
4,910
14,160
Current liabilities
Trade payables
1,000
Total equity and liabilities
15,160

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward

[Solutions Manual]
18.2
Statement of profit or loss for 'B Good' for the year ended 31 March
20X5

Sales revenue
189,560
Returns inward
(560)
189,000
Cost of goods sold
Opening inventory
28,590
Purchases
125,560
Carriage inwards
200
Returns outward
(302)
125,458
154,048
Closing inventory
(35,650)
118,398
Gross profit
70,602
Rent income
300
70,902
Less: expenses
Salaries
4,980
General expenses
1,200
Motor expenses
569
Office expenses
560
Telephone
1,250
Rates
1,000
Carriage outward
546
Insurance
525
Rent
2,000
12,630
Profit for the year
58,272

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward

[Solutions Manual]
Statement of financial position for B. Good as at 31 March 20X5
ASSETS
Non-current assets
Buildings
Fixtures
Motor vans
Current assets
Inventories
Trade receivables
Prepayment
Income receivable
Cash

EQUITY AND LIABILITIES

Owners equity
Capital
Profit for the year
Drawings
Current liabilities
Trade payables
Accrual
Overdraft
Total equity and liabilities

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward

230,000
5,365
12,500
247,865
35,650
28,560
750
100
12
65,072
312,937

178,907
58,272
237,179
(5,562)
231,617
48,560
510
32,250
81,320
312,937

[Solutions Manual]
18.3 a, b & c
Statement of profit or loss for Cara Van for the year ended 31/12/20X4

Sales revenue
131,040
Sales returns
(1,310) 129,730
Cost of sales
Opening inventory
42,120
Purchases
74,700
Purchase returns
(747)
73,953
116,073
Closing inventory
(33,990)
82,083
Gross profit
47,647
Discount received
426
48,073
Less: Expenses
Wages
18,910
Heat & light
1,234
Stationery & postage
268
Carriage outwards
1,446
Insurance
1,598
Rent & rates
3,300
General expenses
1,460
28,216
Profit for the period
19,857
Statement of financial position for Cara Van as at 31/12/X4
ASSETS

Non-current assets
Plant & Machinery
9,060
Current Assets
Inventories
33,990
Trade receivables
1,920
Prepayments
220
Bank
3,222
Cash
65
39,417
Total assets
48,477
EQUITY AND LIABILITIES
Owners equity capital
Opening capital
34,860
Profit
19,857
54,717
Drawings
(7,180)
47,537
Current Liabilities
Trade payables
630
Accruals
310
940
Total equity and liabilities
48,477

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward

[Solutions Manual]
18.4
Sulphur Products
Statement of profit or loss for the year ending 30 September 20X5

Sales revenue
Returns inwards
Less: cost of Sales
Opening inventory
Purchases
Returns outwards

370,000
(4,000)

366,000

12,000
213,000
(2,500)

Closing inventory
Gross profit
Discounts received
Less: expenses
Rent
Telephone
Postage
Electricity
Bank charges
Provision for irrecoverable receivables
Depreciation
Irrecoverable receivables
Profit for the period

210,500
222,500
(16,500)

13,200
2,100
300
2,300
1,800
150
36,750
2,000

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward

206,000
160,000
6,000
166,000

58,600
107,400

[Solutions Manual]
Sulphur Products

Statement of financial position as at 30 September 20X5

ASSETS
Non-current assets
Plant and equipment
Motor vehicles
Current assets
Inventories
Trade receivables
Provision for irrecoverable receivables
Prepayments
Bank

147,000

36,750

110,250
60,000
170,250
16,500

35,000
(1,050)

Total assets
EQUITY AND LIABILITIES
Owners equity capital
Capital @ 01.10.X4
Profit for the period
Drawings
Current Liabilities
Trade payables
Accruals
Total equity and liabilities

33,950
2,200
22,000
74,650
244,900

99,000
107,400
206,400
(9,000)
197,400
47,000
500
47,500
244,900

Workings
Allowance for irrecoverable receivables:
Year-end trade receivables:
irrecoverable receivable:(37,000 - 2,000 = 35,000)
Allowance at the end of the year: 3% (35,000)
1,050
Allowance at the beginning of the year:
900
Increase in allowowance for irrec. Recs
150

McGraw-Hill Education 2015

An Introduction to Financial Accounting 8e by Thomas and Ward