Question

Big Bang Co provided you with the trial balance as at 31st Dec 20X3

Dr Cr

£000 £000

Land and Buildings at cost 5,000

Fixtures and Fittings at cost 1,980

Motor Vehicles at cost 200

Accum depn at 1/1/20X3 – Land 1,000

Accum depn at 1/1/20X3 – F&F 260

Accum depn at 1/1/20X3 – MV 80

Overdraft 55

Revenue 2,090

Purchases 360

Inventory 1/1/20X3 30

Trade payables 75

Trade receivables 120

Operating expenses 280

Allowance for receivables 5

Retained earnings at 1/1/20X3 3,905

Equity share capital 500 7,970 7,970

Additional information

 Depreciation is treated as an operating expense, a full year is
charged in the year of acquisition and none in the year of disposal,
following rates apply: Building 5% pa straight line basis; Fixtures
and fittings 20% pa reducing balance; Motor vehicles 25% pa reducing
balance.

 At the end of the year fixtures and fittings at a cost of £120,000
were scrapped. The accumulated depreciation associated with these
assets were £90,000.

At the end of the year motor vehicles with a cost of £70,000 were sold
for £10,000, the accumulated depreciation on these vehicles was
£50,000. The sales proceeds have not yet been received and have not
been accounted for.

 Of the land and buildings figure £3m relates to land.

 The allowance for receivables is to be maintained at 5% of the
closing receivables balance.

 Closing inventory is £35,000

 An electricity bill for £3,000 covering the quarter ended 31st
December 20X3 was received on 2nd January 20X4. This has not been
included in the accounts.

 Public liability insurance of £18,000 for the 12 months to 30th
April 20X4 was paid on 1st May 20X3. Tax to be accrued for the period
is £180,000.

Required

Prepare statement of profit and loss and the statement of financial
position for Big Bang Co as at 31st December 20X3

Answer 1

	Adjustments
1	Land & Buildings
	Total of Land & Buildings	5,000,000
Less
	Value of Land	3,000,000
	Value of Buildings	2,000,000
1	Depreciation on Buildings - Straight Line	100,000
2	Fixtures & Fittings A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
01-Jan	To Opening Balance	1,980,000	31-Dec	Sale of Fixtures	120,000
			31-Dec	By Balance c/d	1,860,000
	Total	1,980,000		Total	1,980,000
1/1/	To Balance b/d	1,860,000
	Accumulated Depreciation - Fixtures & Fittings A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
31-Dec	Depreciation on Sale of Fixtures	90,000	01-Jan	By Opening Balance	260,000
31-Dec	By Balance c/d	263,000	31-Dec	By Income Statement ( Depreciation for the year on closing balance)	93,000
	Total	353,000		Total	353,000
			1/1/	T0 Balance b/d	263,000
	Sale of Fixture & Fittings A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
31-Dec	Fixtures A/c	120,000	31-Dec	By Accum Dep A/c	90,000
			31-Dec	By Sale (Sold as Scrap)	-
			31-Dec	By Income Statement (P& L A/c) -Loss on Sale	30,000
	Total	120,000		Total	120,000
3	Motor Vehicles A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
01-Jan	To Opening Balance	200,000	31-Dec	Sale of Motor Vehicle	70,000
			31-Dec	By Balance c/d	130,000
	Total	200,000		Total	200,000
1/1/	To Balance b/d	130,000
	Accumulated Depreciation - Motor Vehicles A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
31-Dec	Depreciation - Sale of Motor Vehicle	50,000.00	01-Jan	By Balance b/d	80,000.00
31-Dec	By Balance c/d	62,500.00	31-Dec	By Income Statement (Depreciation for the year on closing balance)	32,500.00
	Total	112,500.00		Total	112,500.00
			1/1/	T0 Balance b/d	62,500.00
	Sale of Motor Vehicles A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
31-Dec	Motor Vehicles A/c	70,000	31-Dec	By Accum Dep A/c	50,000
			31-Dec	By Revenue A/c - Sale	10,000
			31-Dec	By Income Statement (P& L A/c) -Loss on Sale	10,000
	Total	70,000		Total	70,000
	Revenue A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
31-Dec	Motor Vehicles A/c	10,000	31-Dec	Balance	2,090,000
31-Dec	By Income Statement ( P & L A/c)	2,080,000
	Total	2,090,000		Total	2,090,000
			1/1/20X4	By Balance b/c	2,080,000
4	Trade Receivables A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
31-Dec	Balance B/d	120,000
			Dec-31	By Balance c/d	120,000
	Total	120,000		Total	120,000
01-Jan	To Balance b/d	120,000
5	Allowance for Trade Receivables A/c
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
			01-Jan	By Balance B/d	5,000
			Dec 31	To Income Statement	1,000
Dec 31	By Balance c/d	6,000
	Total	6,000		Total	6,000
			1/1/20X4	By Balance b/d	6,000
6		Insurance Prepaid Account
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
May 1, 20X3	Bank (Assumption: Not included in Overdraft)	18,000	Dec 31, 20x3	Insurance Expense Account	12,000
			Dec 31, 20x3	By Balance c/d	6,000
	Total	18,000		Total	18,000
Jan 1, 20X4	To Balance B/d	6,000
		Insurance Expense Account
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
Dec 31, 20x3	Insurance Prepaid Account	12,000	Dec 31, 20X3	By Income Statement ( P & L A/c)	12,000
	Total	12,000		Total	12,000
			1/1/	By Balance b/d
7	Electricity Account Accrued (Outstanding) Account
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
Dec 31, 20X3	Balance c/d	3,000	Dec 31, 20X3	Electricity Expense Account	3,000
	Total	3,000		Total	3,000
			1/1/	By Balance b/d	3,000
7	Electricity Expense Account
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
Dec 31, 20X3	Electricity Expense Outstanding Account	3,000	Dec 31, 20X3	By Income Statement ( P & L A/c)	3,000
	Total	3,000		Total	3,000
			1/1/	By Balance b/d
8	Taxation Expense Accrued (Outstanding/ Provision) Account
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
Dec 31, 20X3	Balance c/d	180,000	Dec 31, 20X3	Taxation expense	180,000
	Total	180,000		Total	180,000
			1/1/	By Balance b/d	180,000
7	Taxation Expense Account
Date	Description	Dr Amount	Date	Particulars	Cr.Amount
	To			By
Dec 31, 20X3	Taxation Expense Outstanding Account	180,000	Dec 31, 20X3	By Income Statement ( P & L A/c)	180,000
	Total	180,000		Total	180,000
			1/1/	By Balance b/d	180,000

Notes and Assumptions:

1. The sale of motor vehicles for Pound 10,000 should normally disclosed seprately, and not clubbed with Product or service revenue account. In these workings, it has been clubbed for convenience purposes. Sale Account shown in the workings should read Revenue Account.

2. As the sale proceeds of motor vehicles has not been received, or accounted for, as at the date of the Balance sheet, the sale and accrual have been done accordingly. On receipt of sale proceeds, the Casbh/Bank Account will be debitted, and Sale/ Revenue Account credit.

3. It is assumed that Public Liability insurance payment has not been taken into consideration. The same is now reflected,and the Overdraft account adjusted for the Insurance Payment.