Exam Question (Financial Statements

UK Discussion in 'Exams and Studying' started by ConM, Nov 13, 2017.

  1. ConM

    ConM

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    Hi there everyone

    I need some help understanding my accountancy assignment. I've already submitted the assignment and received guidance back from the teacher. However, I'm still unable to finish it

    Here's the guidance from my lecturer:

    "An acceptable first attempt but there were a few errors. Add opening stock to the newly adjusted purchase figure. Sales returns and many other items appear twice. When you use a figure once you don't use it again. 250 of money is owing that needs to be added in the income statement. No depreciation has been made or calculated for this year and also not shown in the balance sheet. Again investment income has been shown twice."

    So I've read the advice and made changes but I know it's still not there as the position statement doesn't balance.

    Additional Notes :

    i) Stock (31/05/12) £ 19 200
    ii) insurance prepaid £ 100
    iii) telephone owing £ 250
    iv) Provision for doubtful debtors to be 5 % of outstanding debtors
    v) Depreciation : Motor Vehicles, Reducing Balance Method 25 %
    Fixtures and Fittings, Straight Line Method 10 %
    vi) Investment income due £ 1 000
    vii) Auditors fees owing £ 1 150
    viii) Tax on profit after interest to be £ 6 000 and is to be paid in arrears
    ix) Nominal value per share is £ 0.50 and the directors of the company have declared a final dividend of £ 0.10 per share

    Thanks everyone. My attempt has been uploaded. This is to understand where I went wrong in my assignment.
     

    Attached Files:

    Last edited by a moderator: Nov 13, 2017
    ConM, Nov 13, 2017
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  2. ConM

    Fidget VIP Member

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    There's a few things wrong in both your income statement and balance sheet.

    Income Statement:

    * you've included sales returns in operating expenses - this has already been accounted for in your deduction from Sales.
    * the £250 you have as 'accruels' relates to the phone bill. So add it to the amount already paid ie £750 + £250 = £1000 instead of showing it separately.
    * You've completely missed out the depreciation charge for the year for both motor vehicles & fixtures - the question tells you how to calculate it.
    * Dividends should be £9,000. £3000 interim + £6000 final.

    Balance Sheet:

    * Fixed Assets:

    Accumulated depreciation should be the depreciation charge as per the trial balance + the charge for the year.

    * Current Assets:

    Investment income should only be the part that's due ie £1000. You've already had the other £2000 as per the trial balance.

    * Current Liablities

    - You've completely missed out the figure for Creditors.
    - Electricity, Insurance and salaries should not be in there at all
    - The accrual for telephones is simply the £250 outstanding (which you're showing separately as 'accruel'. The other £750 that you've put for telephones should not be there - you've paid that already.
    - Debentures: You've got two accruals here, one for £750 and the other for £1750. You got the debenture interest payable correct in your income statement ie £1000... so if you've already paid £750 of that (as per the trial balance), then the accrual is only for the balance: £250.
    - Final dividend should be £6000. The interim dividend is in the trial balance so has already been paid. The final dividend of £6000 hasn't been paid, so needs accrued.

    Financing:

    - You've missed out the £10,000 of debentures.

    If you work this through you should have a net profit of £9,000 and your balance sheet should balance at £51,950.
     
    Last edited: Nov 13, 2017
    Fidget, Nov 13, 2017
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  3. ConM

    ConM

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    Hi Fidget

    Thanks for your help!! Brilliant answer. I'm new to accounting (clearly), so this has helped a lot!!

    Thanks again
    Con
     
    ConM, Nov 14, 2017
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