Leaving Cert Accounting FINAL ACCOUNTS - Sole Trader: The following trial balance was

Question

The following trial balance was extracted from the books of A. Kenny on 31/12/2020:

€

Land and buildings (cost €900,000)
795,000
Delivery vans (cost €380,000)
310,000
Equipment at cost
178,800
Discount (net)
4,700
5% Fixed Mortgage (including €50,000 issued on 31/03/2020)
280,000
3% Investments acquired on 01/08/2020
210,000
Stock 01/01/2020
68,700
Sales
1,105,000
Purchases
1,101,005
Salaries and general expenses
135,800
Advertising (incorporating suspense)
36,000
Investment interest received
2,200
Drawings
60,000
Rates
43,200
PAYE, PRSI, USC
3,875
VAT
29,500
Bank
52,100
Mortgage interest paid for the first three months
2,375
Debtors and creditors
97,300
68,600
Bad debts provision
5,700
Capital
800,000

3,042,175

The following information and instructions are to be taken into account:

(i) Stock at cost on 31/12/2020 was €72,100. This figure includes damaged stock which cost €12,400 but which now has a net realisable value of 25% of cost.

(ii) Goods were sent to a customer on a 'Sale or Return' basis on 31/12/2020. These goods were recorded in the books as a credit sale of €28,000 which is a mark-up on cost of 25%.

(iii) Provision for depreciation on delivery vans at the annual rate of 20% on cost from the date of purchase to the date of sale.

(iv) Note: On 31/03/2020 a delivery van which had cost €42,000 on 30/09/2016 was traded in against a new van which cost €67,000. An allowance of €11,000 was made on the van traded in. The cheque for the net amount of this transaction was entered in the bank account but was incorrectly treated as a purchase of trading stock. These were the only entries made for this transaction.

(v) During 2020 a storeroom stock €75,000 and stock which cost €24,000 were destroyed by fire. This insurance company has agreed to contribute €10,000 towards the fire damage. No entry had been made in the books in respect of the fire.

(vi) A new storeroom was built during the year. The cost of their labour €44,000 had been treated as a business expense and the materials costing €38,000 were taken from existing stock. No entry had been made in the books in respect of the new storeroom.

(vii) Buildings are to be depreciated at the rate of 2% of cost per annum (land at cost was €400,000). It is proposed to revalue the land and buildings at €1,000,000 on 31/12/2020.

(viii) The serious figure arises as a result of the incorrect figure for mortgage interest liabilities (the correct entry had been made in the bank account) and a payment of €2,900 to creditors to correct the entry in the bank account.

(ix) The figure for bank in the trial balance has been taken from the business bank account. However, a bank statement dated 31/12/2020 has arrived showing an overdraft of €29,200. A comparison of the bank account and the bank statement revealed the following discrepancies:

- A credit transfer for €1,800 had been processed on 31/12/2020 in respect of a debt of €2,500 previously written off as bad. The debtor has agreed to pay the remainder in within two months. No entry was made in the books to record this transaction.

- A cheque for €1,800 issued to a supplier had been entered in the books (cash book and ledger) as €17,800.

- A cheque for advertising €17,200 has not been presented for payment in the books.

(viii) Provision should be made for the following:

1. Investment income for the year, incorporating interest due.

2. Note: 2% of mortgage interest for the year refers to the private section of the building.

3. Provision for bad debts to be adjusted to 65% of debtors.

The following trial balance was extracted from the books of A - Leaving Cert Accounting - Question 1 - 2021

Worked Solution & Example Answer:The following trial balance was extracted from the books of A - Leaving Cert Accounting - Question 1 - 2021

a) Prepare a trading and profit and loss account for the year ended 31/12/2020.

Balance Sheet of A. Kenny as at 31/12/2020

Assets

Total Assets

Liabilities

Total Liabilities

Capital and Reserves

Total Capital Employed

Final Balance

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