Carstairs is a sole trader. You have been asked to assist with preparing her financial statements for the year ended 31 December 2022.

Carstairs Initial Trial Balance at 31 December 2022
		DR		CR
Capital account at 1 January 2022			45,200
Purchases		194,100
Revenues				261,450
Wages and salaries		16,720
Rent and property charges		12,930
Trade receivables		36,400
Sundry expenses		2,500
Drawings		9,500
Provision for doubtful debts				1,590
Cash at bank		16,500
Trade payables				24,350
Inventory at 1 January 2022		41,060
Machinery at cost		7,200
Accumulated depreciation				4,320
		336,910		336,910

The following additional information is available:

1. Closing inventory has been valued at 49,670.
2. The rent is 6,400 per annum payable half-yearly in advance on 31 March and 30 September. This is included in rent and property charges above. You only need to adjust for the prepayment and the related reduction in the expense at the year end 31 December 2022 (last year's prepayment has already been adjusted for).
3. Depreciation on the machinery is to be provided using the reducing-balance method at the rate of 20 percent per annum.
4. The provisions for doubtful debts of 1,590 was the general provision at 1 January 2022. At 31 December 2022 Dockson decides that 900 of the outstanding receivables should be written off as irrecoverable. He also wishes to adjust the provision to 5 percent of receivables.
5. Wages of 1,500 are outstanding at 31 December 2022.
6. Sales returns for cash of 8,500 have been omitted from the records and need to be adjusted for. (a) Produce a final trial balance with the adjustments from parts (i) to (vi) included. Show the journals for the adjustments.

(b) Produce a statement of profit or loss account for the year ended 31 December 2022and a statement of financial position as at that date for Carstairs.

Answer rating: 100% (QA)

Lets start by preparing the adjustments and then proceed to create the final trial balance and financial statements Adjustments Closing Inventory Adju... View the full answer