Question

Bahira Limited reporting period ends on December 31. The following statement of income was prepared by the accounts assistant who has limited Knowledge of accounting.

Bahira Limited Statement of Income For the period ended December 31, 2018
	Sh ‘000’
Fees collected	115,000
Expenses paid
Rent for office space	(13,000)
Utilities	(360)
Telephone	(2,200)
Salaries	(22,000)
Office supplies	(900)
Miscellaneous	(2,400)
	(40,860)
Profit for the period	74,140

In a meeting of shareholders, one of the shareholders of Bahira Limited, who is your childhood friend, questioned the figures. He argued, among other things, the figures appear to be on a 100 percent cash basis. “In the meeting, the shareholders agree to invite you, who was recommended by your childhood friend, to review the records and financial statements.

Your investigations reveal the following:

1. Of the Sh. 115, 000,000 fees collected in 2018, Sh. 36,000, 000 was for services performed prior to 2018.
2. At the end of 2018, fees of Sh. 9,000,000 for services performed during the year were uncollected.
3. Office equipment owned and used by Bahira Limited cost Sh. 5,000,000. Depreciation on the equipment was estimated at Sh. 500,000 annually.
4. A count of office supplies at December 31, 2018 reflected Sh. 200,000 worth of items purchased during the year that were still on hand. Also, the records for 2017 indicated that the supplies on hand at the end of that year were about Sh. 125,000.
5. At the end of 2018, the secretary whose salary is Sh. 60,000 per month had not been paid for December 2018.
6. A Sh. 13,000,000 office rent paid was for 13 months (it included the rent for January, 2019).

Required:

1. On the basis of your findings, prepare the correct statements of income for Bahira Limited for the period December 31, 2018.                                                   
2. Show all your workings for any amounts changed from those in the statement of income prepared by the accounts assistant.                                                      

Answer 1

a.)	Correct Income Statement
	Bahira Limited
	For the period ended December 31, 2018
		Sh ‘000’
	Fees revenue ( 115,000 - 36,000 + 9,000 )	88,000
	Expenses paid
	Rent for office space ( 13,000 - ( 13,000 /13 ) )	-12,000
	Utilities (360 - 200 + 125 )	-285
	Depreciation (Given )	-5,000
	Telephone	-2,200
	Salaries ( 22,000 + 60 )	-22,060
	Office supplies	-900
	Miscellaneous	-2,400
	Total	-44,845
	Profit for the period	43,155
b.)	Amount Changed Details	Sh'000'
	Fees revenue ( 115,000 - 36,000 + 9,000 )	88,000
	Rent for office space ( 13,000 - ( 13,000 /13 ) )	12,000
	Utilities (360 - 200 + 125 )	285
	Depreciation (Given )	5,000
	Salaries ( 22,000 + 60 )	22,060