Question

Question Two The following balances were extracted from the books of Bashara Kabwa Enterprises, a wholesale business, as at 31 October 2018: Drawings 660,000 Trade receivables 990,000 Purchases 2,303,840 Sales returns 79,420 Capital 4,101,100 Trade payables 330,000 Sales 4,691,280 Purchases returns 120,340 Discount received 93,720 Provision for depreciation: Motor vehicles 176,000 Fixtures and fittings 63,800 Allowances for doubtful debts 44,000 15% bank loan 220,000 Salaries and wage 1,034,000 Discount allowed 54,560 Bank balance 568,260 Cash in hand 26,400 Electricity expenses 103,840 Rent and rates 54,560 Freehold premises (cost) 1,569,700 Fixtures and fittings (cost) 334,400 Motor vehicles (cost) 462,000 Stationery 34,320 Postage and telephone expenses 44,000 Insurance premiums 13,200 Bad debts written off 15,840 Motor vehicle expenses 84,920 Inventory (1 November 2017) 1,393,480 Interest on bank loan 16,500 Additional information: 1. The value of inventory as at 31 October 2018 was Sh. 1,036,400 2. Sales includes Sh. 300,000 worth of goods sold by Bashara Kabwa Enterprises agents, who are allowed 15% commission on such sales. This transaction has not been recorded in the books. 3. Depreciation is to be provided as follows: Fixtures and fittings – 10% per annum on reducing balance basis. Motor vehicle – 15% per annum on straight line basis. 4. Annual insurance premium amounted to Sh. 12,000. 5. As at 31 October 2017, there was a balance of Sh. 65,000 received from a customer in cash. 6. Salaries and wages were in arrears of Sh. 35,000 7. The Electricity bill for the month of October of Sh. 14,500 was received on 5 November 2018. 8. An allowance of 5% is to be maintained for doubtful debts. 9. Goods worth Sh. 48,840 had been distributed to potential customers as free samples. Required: a) Income statement for the year ended 31 October 2018 b) Statement of Financial position as at 31 October 2018 c) Error of commission :

Answer 1