Although Janet Lambert has run a small business for many years, she has never kept adequate accounting records. However, a need to obtain a bank loan for the expansion of the business has necessitated the preparation of ‘final’ accounts for the year ended 31 August 20X9. As a result, the following information has been obtained after much careful research: 

1. Janet Lambert’s business assets and liabilities are as follows:

2. All takings have been banked after deducting the following payments:

Takings have been the source of all amounts banked.

3. Bank payments during the year ended 31 August 20X9 have been summarised as follows:

4. It has been established that a gross profit of 331/3% on cost has been obtained on all goods sold.

5. Despite her apparent lack of precise accounting records, Janet Lambert is able to confirm that she has taken out of the business during the year under review goods for her own use costing £600.

Required:

(a) Prepare a computation of total purchases for the year ended 31 August 20X9.

(b) Prepare a trading and profit and loss account for the year ended 31 August 20X9 and a balance sheet as at that date, both in as much detail as possible.

(c) Explain why it is necessary to introduce accruals and prepayments into accounting.

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As at Stock in trade Debtors for sales Creditors for purchases Rent prepaid Electricity accrued due Balance at bank Cash in hand 1 September 20X8 £ 8,600 3,900 7,400 300 210 2,300 360 31 August 20X9 £ 16,800 4,300 8,900 420 160 1,650 330