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Incomplete Records – Control Accounts Paul Brett did not keep a full set of books during the year ended 31/12/2019 - Leaving Cert Accounting - Question 7 - 2020
Question 7
Incomplete Records – Control Accounts Paul Brett did not keep a full set of books during the year ended 31/12/2019. The following is a summary of the cash account fo... show full transcript
Worked Solution & Example Answer:Incomplete Records – Control Accounts Paul Brett did not keep a full set of books during the year ended 31/12/2019 - Leaving Cert Accounting - Question 7 - 2020
Step 1
Calculate Paul Brett’s capital on 01/01/2019.
Answer
To calculate capital, we need to consider the assets and liabilities.
Assets
- Premises: €54,000
- Equipment: €32,000
- Debtors: €32,000
- Stock: €16,400
- Cash: €21,900
- Expenses Prepaid: €2,700
Total Assets = €54,000 + €32,000 + €32,000 + €16,400 + €21,900 + €2,700 = €159,000
Liabilities
- Creditors: €13,400
Capital = Total Assets - Liabilities = €159,000 - €13,400 = €145,600
Conclusion
Paul Brett’s capital on 01/01/2019 is €145,600.
Step 2
Calculate Paul Brett’s total sales and total purchases using control accounts.
Answer
Total Sales Calculation
Using the Debtors' Control Account:
- Opening Balance: €32,000
- Debtors’ total = Opening Balance + Sales - Closing Balance
- Closing Balance: €18,100
Thus:
Sales = Closing Balance + Purchases - Opening Balance = €18,100 + Sales - €32,000 = €216,000
Total Sales = €216,000.
Total Purchases Calculation
Using the Creditors' Control Account:
- Opening Balance: €26,600
- Closing Balance: €21,800
Thus:
Total Purchases = Closing Balance + Purchases - Opening Balance = €21,800 + Purchases - €26,600 = €142,000.
Total Purchases = €273,300.
Step 3
Prepare a trading and profit and loss account for the year ended 31/12/2019.
Answer
Trading and Profit and Loss Account for the Year Ended 31/12/2019
Sales
- Total Sales: €394,300
Cost of Sales
- Opening Stock: €26,600
- Purchases: €273,300
- Less Closing Stock: €24,200
Cost of Sales = Opening Stock + Purchases - Closing Stock = €26,600 + €273,300 - €24,200 = €275,700
Gross Profit
Gross Profit = Sales - Cost of Sales = €394,300 - €275,700 = €118,600
Less Expenses
- Wages and General Expenses: €92,700
- Depreciation of Equipment: €6,400
Total Expenses = €92,700 + €6,400 = €99,100
Net Profit
Net Profit = Gross Profit - Total Expenses = €118,600 - €99,100 = €19,500
Step 4
Prepare a balance sheet as at 31/12/2019.
Answer
Balance Sheet of Paul Brett as at 31/12/2019
Fixed Assets
- Premises: €540,000
- Equipment: €25,600
- Motor Vans: €25,000
Total Fixed Assets = €540,000 + €25,600 + €25,000 = €590,600
Current Assets
- Closing Stock: €24,200
- Debtors: €18,100
- Bank: €36,700
- Expenses Prepaid: €2,200
Total Current Assets = €24,200 + €18,100 + €36,700 + €2,200 = €81,200
Current Liabilities
- Creditors: €21,800
Working Capital
Working Capital = Current Assets - Current Liabilities = €81,200 - €21,800 = €59,400
Capital Account
- Capital: €626,200
- Add Net Profit: €19,500
- Less Drawings: €8,500
Net Worth = Capital + Net Profit - Drawings = €626,200 + €19,500 - €8,500 = €637,200
Conclusion
The balance sheet provides a comprehensive view of the financial position as at 31/12/2019.