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Question 5 a) Jamie operates as a sole trader. He has extracted the following data from...

Question 5

a) Jamie operates as a sole trader.

He has extracted the following data from his books of account. Financial data extracts for the year ended 31st January 2019.

6

Sales

Purchases Opening Inventory Closing Inventory

REQUIRED

£ 140 000

100 000 40 000 20 000

Prepare Jamie’s Trading Account for the year ended 31st January 2019. Clearly show the value of Cost of Sales and Gross Profit.

b) Explain the difference between the straight-line method and the reducing 4 balance method of depreciation.

Expert Solution

Solution 5a:-

Jamie's Trading Account

(for year ended 31st January,2019)

Discription	£	£
Sales		140000
Cost of Sales :-
Opening inventory	40000
Add:- Purchase	100000
	140000
Less: - Closing inventory	20000
Cost of sales	120000	120000
Gross profit		20000

Solution b :-

Difference between Straight line method and Reducing Balance method of Depreciation

Base	Straight line method	Reducing Balance method
Assets cost	Depreciation are calculated on Book value of asset for each year	Depreciation are calculated on current value ( value after deducting previous year Depreciation) of assets for each year
Depreciation Amount	The depreciation amount remains same each year	The Depreciation amount reduce by each year from previous one
Ending value	The ending value of asset will be zero or scrap at end of useful life	The ending value of assets will be non zero at end of useful life .
Combined cost	Combined cost of depreciation and repair decreasing trend	Combined cost of depreciation and repair coulb be ramains more ,less or equal throughout the period

ekkarill92 answered 3 years ago

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