The following Trial Balance has been extracted from the books of Richard as at 31 December...
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The following Trial Balance has been extracted from the books of Richard as at 31 December 2020: Richard's capital at 1 January 2020 Sales Purchases Inventory as at 1 January 2020 Wages and salaries Sundry expenses Motor expenses Insurance Equipment at cost Motor vehicles at cost Accumulated depreciation of equipment at 1 January 2020 Accumulated depreciation of motor vehicles at 1 January 2020 Trade Receivables Cash Trade Payables Allowance for trade receivables at 1 January 2020 Long-term loan Bank (overdraft) Drawings Dr £ 78,000 7,800 6,600 2,540 15,332 2,500 72,000 48,000 20,100 900 21,988 Cr £ 12,678 191,000 14,400 24,000 16,540 300 20,000 6,842 Rent 10,000 285,760 285,760 The information given below relates to the year ended 31 December 2020: 1) A physical count of inventory showed that the value of the inventory at 31 December 2020 was £9,134. Wages and salaries unpaid at 31 December 2020 amounted to £500. 2) 3) 4) 5) 6) Required On 31 December 2020 rent of £2,000 had been paid in advance. Bad debts of £600 are to be written off at the year-end. The allowance for trade receivables is to be adjusted to 2% of trade receivables. Depreciation is calculated for equipment at 10% per annum on cost, and at 50% on the reducing balance for motor vehicles. Interest on the loan is to be calculated at 5% for the twelve months, but has not yet been paid. (a) Prepare for Richard the income statement for the year ended 31 December 2020 and a balance sheet at that date. (b) Identify and write brief notes on at least 2 examples of the accruals basis of accounting (otherwise known as the matching principle) encountered in the preparation of Richard's income statement and balance sheet in part (a). (c) Using the exercise above as an illustration explain how accounting choice and judgment is used in accounting. The following Trial Balance has been extracted from the books of Richard as at 31 December 2020: Richard's capital at 1 January 2020 Sales Purchases Inventory as at 1 January 2020 Wages and salaries Sundry expenses Motor expenses Insurance Equipment at cost Motor vehicles at cost Accumulated depreciation of equipment at 1 January 2020 Accumulated depreciation of motor vehicles at 1 January 2020 Trade Receivables Cash Trade Payables Allowance for trade receivables at 1 January 2020 Long-term loan Bank (overdraft) Drawings Dr £ 78,000 7,800 6,600 2,540 15,332 2,500 72,000 48,000 20,100 900 21,988 Cr £ 12,678 191,000 14,400 24,000 16,540 300 20,000 6,842 Rent 10,000 285,760 285,760 The information given below relates to the year ended 31 December 2020: 1) A physical count of inventory showed that the value of the inventory at 31 December 2020 was £9,134. Wages and salaries unpaid at 31 December 2020 amounted to £500. 2) 3) 4) 5) 6) Required On 31 December 2020 rent of £2,000 had been paid in advance. Bad debts of £600 are to be written off at the year-end. The allowance for trade receivables is to be adjusted to 2% of trade receivables. Depreciation is calculated for equipment at 10% per annum on cost, and at 50% on the reducing balance for motor vehicles. Interest on the loan is to be calculated at 5% for the twelve months, but has not yet been paid. (a) Prepare for Richard the income statement for the year ended 31 December 2020 and a balance sheet at that date. (b) Identify and write brief notes on at least 2 examples of the accruals basis of accounting (otherwise known as the matching principle) encountered in the preparation of Richard's income statement and balance sheet in part (a). (c) Using the exercise above as an illustration explain how accounting choice and judgment is used in accounting.
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Answer a Income statement for the year ended 31 December 2020 Revenue 191000 Cost of goods sold 7800... View the full answer
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
Posted Date:
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