Sami a sole trader started business in 2014 and prepares his Income statement by the end of
Question:
Sami a sole trader started business in 2014 and prepares his Income statement by the end of March. The Recent Income Statement for the year ended 31 March 2022 is as follows:
£ | ||
Sales | 600,000 | |
Less: Cost of Sales | (240,000) | |
Gross Profit | 360,000 | |
Add: other Income | ||
Interest on debenture | 19,000 | |
Rental Income | 2,000 | |
Dividend Income | 17,000 | 38,000 |
Less: Expenses: | 398,000 | |
Depreciation | 20,000 | |
Wages and Salaries | 30,000 | |
Interest Expense | 14,000 | |
Subscription | 1,600 | |
Donation | 10,000 | |
Bad and doubtful debt | 4,000 | |
Gift and Entertainment | 5,000 | |
Other Expense | 4,400 | |
Repairs and maintenance | 17,000 | |
Car Expenses | 12,000 | |
Car Lease Rent | 14,000 | -134,000 |
NET PROFIT | 264,000 |
Note 1:
- Sami is full-time working for his sole trader business, for that he has taken a salary of £4000 from the business.
- Sami borrowed a loan from Bank for the purposes of a business as well as his sister’s marriage. Total interest paid of £14,000 includes £3000 is for the loan of his sister’s marriage. The remaining interest is for business purposes.
- Sami used to visit a gym near his residence. He paid the annual membership fees of £200 from the business fund and included it in the heading as Subscription. Also, he paid a £600 subscription for the trade association, and the balance all for business purposes.
- Sami is very generous by giving various donations to a local charity and political party. From the business fund, he paid a local charity of £600, a National charity of £3,800, and for political party £5,600 during the year.
- Sami gave so many loans to his staff, customers and suppliers. The staff who took a loan left his business and joined another large company. Sami has treated the remaining loan of £500 as Bad debt. Also, a customer who borrowed £400 has absconded and Sami treated that amount as bad debt. Balance out of bad and doubtful debts are related to the business.
- Gift and Entertainment:
Sami arranged a family get-together in a hotel and spent £2000 from business money.
Gift of Chips packets costing £0.50 for 1000 customers
Gift of Cigarette packets to Staff each costing £5 each for 100 staff
Entertainment for customers £1000
Staff Entertainment £500
- Other expenses include a Fine and penalty of £200 for throwing the waste product to the roadside, a £50 Parking fine of Sami, and a £100 parking fine of the Employees, balance all for normal general expenses incurred for the purposes of business.
- Repairs and maintenance include both revenue and capital expenditures. Purchase of plant and machinery costing £10,000 and building repair costing 7,000 included in the cost of the repair.
- Car Expenses:
Using a business car, Sami traveled 10,000 miles during the year, out of this, 3,000 miles is for personal use. But the total car expense has been shown in the income statement.
- Sami has taken another car for business use on a lease basis. The CO2 emission of the car was 140 gm/km and paid the rent of £14,000.
- The capital allowance of the business is £30,000 for the year-end 31 March 2022.
- The business had a £20,000 trading loss for the year ended 31 March 2021.
Required:
- Calculate the adjusted trading Profit of Sami for the year ended 31 March 2022. (8 marks)
- Calculate the Class 2 and 4 NIC for the business of Sami. (1 mark)
- Assume that Sami has submitted his Income-tax return late and has not maintained the books and records.
- Explain the due date for submitting the return, and calculate the penalty, if his tax liability for 2020/21 is 12,000.
- explain how long Sami has to maintain books and records, and what is the penalty for non-compliance of the above. ( max. 100 words) (3 mark)
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott