The trial balance of Norr Ltd at 31 December 20X2 appeared as follows:

Additional information
1. During the year a motor vehicle purchased on 31 March 20W9 for £8,000 was sold for £3,000. The sale proceeds were debited to the bank account and credited to the sales account, and no other entries have been made in the financial statements relating to this transaction.
2. Depreciation has not yet been provided for the year. The following rates are applied on the straight-line basis, with the assumption of no residual value:
Fixtures and fittings 10 per cent
Motor vehicles 20 per cent
The company's policy is to provide a full year's depreciation in the year of acquisition and no depreciation in the year of disposal.
3. Inventory at 31 December 20X2 amounted to £45,000.
4. Rates paid in advance amount to £400. Insurance includes £200 paid in advance. An electricity bill covering the quarter to 31 December 20X2 and amounting to £320 was not received until February 20X3. It is estimated that the audit fee for 20X2 will be £1,500. An accrual also needs to be made in relation to debenture interest.
5. A general provision for bad debts of 4 per cent of trade receivables is to be carried forward.
6. The directors propose a dividend of £10,000.
Required
a. Prepare a statement of comprehensive income and statement of financial position on the basis of the above information.
b. Explain the meaning of the terms 'provision' and 'reserve', giving one example of each from the statement of financial position you have prepared.

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Credit 50,000 30,000 Debit Equity shares of £1 fully paic 220,000 Purchases Retained profit 80,000 15,000 Freehold property cost Fixtures cost Fixtures accumulated depreciation Rates Motor vehicles cost Motor vehicles - accumulated depreciation Insurance Inventories Trade receivables 9,000 3,000 28,000 14,000 2,000 40,000 30,000 24,000 310,000 Trade payables Sales revenue Bank 12% debentures Debenture interest Wages and salaries 12,100 40,000 2,400 34,000 4,100 3,900 1,200 2,000 Heat and light Professional fees General expense Motor expenses Provision for bod debts Bad debts 1,000 300 478,000 478,000