Question

Mr Ahmed Kumar runs a snack distribution business located in the Light Industrial area in Lusaka. The following list of balances was extracted from his ledger as at 31 March, 2020; the end of his most recent financial year.

K

Capital 83,887

Sales 259,870

Trade accounts payable 19,840

Returns outwards 13,407

Allowance for doubtful debts 512

Discounts allowed 2,306

Discounts received 1,750

Purchases 135,680

Returns inwards 5,624

Carriage outwards 4,562

Drawings 18,440

Carriage inwards 11,830

Rent, rates and insurance 25,973

Heating and lighting 11,010

Postage, stationery and telephone 2,410

Advertising 5,980

Salaries and wages 38,521

Bad debts 2,008

Cash in hand 534

Cash at bank 4,440

Inventory as at 1st April 2019 15,654

Trade accounts receivable 24,500

Fixtures and fittings - at cost 120,740

Prov. for depreciation on fixtures and fittings – 31/03/2020 63,020

Depreciation 12,074

The following additional information as at 31st March, 2020 is available:

(a) Inventory at the close of business was valued at K17,750

(b) Insurances have been prepaid by K1,120

(c) Heating and lighting is accrued by K1,360

(d) Rates have been prepaid by K5,435

(e) The allowance for doubtful debts is to be adjusted so that it is 3% of trade accounts receivable.

 

Required:

For the year 2020, prepare Mr Kumar’s:

1. Unadjusted Trial Balance as at 31st March, 2020.

General Journal recording the adjustments highlighted above.

Trading, Profit or Loss statement for the year ended 31st March, 2020.

Statement of financial position as at 31st March, 2020.

Answer 1

a)

Unadjusted Trial Balance
For the year ending 31st Mar 2020
Accounts	Debit	Credit
Capital		83887
Sales		259870
Trade accounts payable		19840
Return outwards		13407
Allowance for doubtful debts		512
Discounts allowed	2306
Discounts received		1750
Purchases	135680
Return inwards	5624
Carriage outwards	4562
Drawings	18440
Carriage inwards	11830
Rent, rates and insurance	25973
Heating and lighting	11010
Postage, stationary and telephone	2410
Advertising	5980
Salaries and Wages	38521
Bad debts	2008
Cash in hand	534
Cash at bank	4440
Inventory as at 1st April 2019	15654
Trade accounts receivable	24500
Fixtures and fittings at cost	120740
Prov. For depreciation on fixtures and fittings - 31/03/2020		63020
Depreciation	12074
Total	442286	442286

 

b)

Date	Accounts	Debit	Credit	Calculation
a	Inventory as at 31st March 2020	17750
	P&L Account		17750
b	Prepaid Insurance	1120
	Rent, rates and insurance		1120
c	Heating and lighting	1360
	Heating and lighting Payable		1360
d	Prepaid Rates	5435
	Rent, rates and insurance		5435
e	Bad Debts	223		(3%*24500)-512
	Allowance for doubtful debts		223

 

c)

Trading, Profit or Loss Statement
For the year ending 31st Mar 2020
Accounts		Amount
Sales	259870
Return inwards	-5624
Net Sales		254246
Cost of Goods Sold:
Purchases	135680
Return outwards	-13407
Carriage inwards	11830
Inventory as at 1st April 2019	15654
Inventory as at 31st March 2020	-17750
Total Cost of Goods Sold		132007
Gross Profit		122239
Operating Expenses:
Discounts allowed	2306
Carriage outwards	4562
Rent, rates and insurance	19418
Heating and lighting	12370
Postage, stationary and telephone	2410
Advertising	5980
Salaries and Wages	38521
Bad debts	2231
Depreciation	12074
Total Operating Expenses		99872
Discounts received		1750
Net Income	Gross Profit - Total Operating Expenses + Discount Received	24117

 

d)

Statement of financial position
As on 31st Mar 2020
Accounts		Amount
Current Assets
Cash in hand		534
Cash at bank		4440
Trade accounts receivable	24500
Allowance for doubtful debts	-735
Trade accounts receivable, net		23765
Inventory		17750
Prepaid Insurance		1120
Prepaid Rates		5435
Total Current Assets		53044
Non Current Assets
Fixtures and fittings at cost	120740
Prov. For depreciation on fixtures and fittings - 31/03/2020	-63020
Total Non Current Assets		57720
Total Assets		110764
Current Liabilities
Trade accounts payable		19840
Heating and lighting Payable		1360
Total Liabilities		21200
Capital
Capital	83887
Drawings	-18440
Net Income	24117
Total Capital		89564
Total Liabilities and Capital		110764

a)

Unadjusted Trial Balance
For the year ending 31st Mar 2020
Accounts	Debit	Credit
Capital		83887
Sales		259870