Select Ltd is registered with an authorised capital of 300,000 ordinary shares of £1. The following trial balance was extracted from the books of the company on 31 March 2012, after the preparation of the trading account:

Required: Prepare the profit and loss account section of the income statement and a statement of changes in equity for of the company for the year ending 31 March 2012, and statement of financial position as at that date, after taking into account the following adjustments: (i) The allowance for doubtful debtors is to be adjusted to £700. (ii) Depreciation is to be provided in respect of furniture and fittings at 10% per annum on cost. (iii) £25,000 is to be transferred from profit and loss to general reserve. (iv) Provide for a proposed dividend on share capital at 10%. Present the statement of financial position in a form which shows the shareholders’ equity and the working capital.

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Ordinary share capital, fully paid Land and buildings at cost Sundry accounts receivable Furniture and fittings at cost VAT Sundry accounts payable Inventory at 31 March 2012 Bank Trading account: gross profit Office salaries and expenses Accumulated provision for depreciation on furniture and fittings Share premium account Advertising and selling expenses Bad debts Allowance for doubtful debts Retained profits Directors' fees Dr 170,000 38,300 80,000 3,800 42,000 12,000 25,000 5,000 250 11,300 387,650 200,000 25,000 98,050 32,000 20,000 600 12,000 387,650