Question

Below is the trial balance of Rod Ropes Ltd, year ending 31^st May 2020:

	DR	CR
	£	£
10% Debenture, 2030		100,000
Debenture Interest	8,000
Inventory (stock) at (01/06/19)	210,000
Administration expenses	23,000
Purchase returns		2,000
Marketing expenses	11,500
Bank	13,200
Sales		392,000
Purchases	252,000
Discounts Allowed	5,300
Discounts Received		3,000
Provision for Doubtful Debtors (at 01/06/19)		3,000
Non-current Assets at costs:
Motor Vehicles	50,000
Fixtures and Fittings	12,000
Freehold land	50,000
Accumulated Depreciation (at 01/06/19):
Motor Vehicles		10,000
Fixtures and Fittings		2,400
Trade Payables (Creditors)		46,900
Trade Receivables (Debtors)	140,000
Retained profits (at 01/06/19)		45,700
Share capital		170,000
	775,000	775,000

Notes: The following have not yet been reflected in the trial balance.

i) Inventory (stock) at 31/05/20 was valued at £260,000.

ii) Within administration expenses there is a prepayment of £3,000 that needs to be reflected.

iii) As at the 31/05/20 there was Marketing expenses owing of £5,000 that needs an accrual.

iv) Provision for doubtful debtors is to be 5% of outstanding trade receivables (debtors) as at

31/05/20.

v) Depreciation: Motor Vehicles, Reducing Balance Method 20% Fixtures and Fittings, Straight

Line Method 10%

vi) Tax on profit after interest of £30,000 has not yet been paid.

vii) Debenture interest has partly been paid however the remaining needs to be accrued for.

Additional note: There were no dividends paid during the year (interim) or due to be paid at the

end of the year.

(a) Prepare the Statement of Profit or Loss for the year ending 31st May 2020.

(b) Prepare the Statement of Financial Position as at 31st May 2020.

(c) Define and illustrate one (1) accounting concept that you have used in constructing the financial

statements above.

(d) State and briefly explain one (1) characteristic of what makes ‘good’ accounting information.

Answer 1