Osborne Books Update. Final Accounts Preparation Tutorial. Amended pages 67 to 71 Case Study: ELECTROPARTS

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1 Osborne Books Update Final Accounts Preparation Tutorial Amended pages 67 to 71 Case Study: ELECTROPARTS October 2018

2 a m e n d e d pa g e s 6 7 t o 7 1 C a s e s t u d y: e l e C t r o pa r t s The following pages have been amended to allow for VAT on discounts received. Please note that the figure for discounts received has been altered from 760 to 744 (including VAT) see the Day Book Summary in order to keep the calculations to whole pounds.

3 i n c o m p l e t e r e c o r d s a c c o u n t i n g 6 7 His customers are self-employed repairers who buy parts for specific jobs from his trade counter John allows them credit terms. There are no cash sales. All purchases made by John from suppliers are on credit terms. All sales, disposals of assets and purchases are standard-rated for VAT at 20%. John does not keep a full set of accounting records; however, the following information has been produced for the year ended 31 March 20-8: a s s e t s a n d l i a b i l i t i e s o f e l e c t r o p a r t s a t 1 a p r i l assets Fixtures and fittings at cost 15,000 Less accumulated depreciation 7,500 7,500 Inventory 24,400 Trade receivables 21,650 Prepayment of administration expenses ,190 TOTAL ASSETS 53,690 liabilities Trade payables 15,950 Value Added Tax 2,310 Bank 12,850 TOTAL LIABILITIES 31,110 CapItal 22,580 B a n k a c c o u n t s u m m a r y f o r t h e y e a r e n d e d 3 1 m a r c h Trade receivables 207,410 Balance b/d 12,850 Disposal of fixtures Trade payables 139,620 and fittings (inc VAT) 1,950 Administration expenses 17,760 Wages 18,280 HMRC for VAT 4,360 Drawings 15,390 Balance c/d 1, , ,360 day book summaries net Vat total for the year Sales 196,400 39, ,680 Sales returns 1, ,872 Purchases 135,600 27, ,720 Discounts received Administration expenses 14,800 2,960 17,760 note: there were no discounts allowed and no purchases returns during the year

4 6 8 f i n a l a c c o u n t s p r e p a r a t i o n t u t o r i a l Further information: On 31 March 20-8, inventory was valued at 28,400 Depreciation is charged at the rate of 10% on the cost of fixtures and fittings held at the end of the financial year. No depreciation is charged in the year of disposal Fixtures and fittings purchased on 1 April 20-5 for 2,500 (net of VAT) were sold on 30 September 20-7 for 1,950 (including VAT) On 31 March 20-8, 210 was owing for administration expenses John Anstey asks you to: 1 Calculate the amount of trade receivables at 31 March Calculate the amount of trade payables at 31 March Calculate the gain or loss on the disposal of fixtures and fittings 4 Calculate the amount of VAT due to HM Revenue & Customs at 31 March Calculate the amount of administration expenses to be shown in the statement of profit or loss for the year ended 31 March Prepare the statement of profit or loss for the year ended 31 March Prepare the statement of financial position at 31 March 20-8 s o l u t i o n 1 Dr Sales ledger control account Cr 1 Apr Balance b/d 21,650 Sales returns day book 1,872 Sales day book 235,680 Bank 207, Mar Balance c/d 48, , ,330 2 Dr Purchases ledger control account Cr Bank 139,620 1 Apr Balance b/d 15,950 Discounts received 744 Purchases day book 162, Mar Balance c/d 38, , ,670

5 i n c o m p l e t e r e c o r d s a c c o u n t i n g gain or loss on disposal of fixtures and fittings Depreciation charge per year 250 Number of years depreciation 2 (20-5/-6,20-6/-7; no depreciation in year of sale) Accumulated depreciation 500 Disposals 1, VAT = 1,950 Dr disposals account Cr 30 Sep Fixtures and fittings 2, Sep Accumulated depreciation Sep VAT on disposals Sep Bank (disposal proceeds) 1, Mar Statement of profit or loss (loss on disposal) 375 2,825 2,825 4 Dr Vat control account Cr Sales returns day book Apr Balance b/d 2,310 Purchases day book 27,120 Sales day book 39,280 Administration Disposals 325 expenses day book 2,960 Discounts received 124 Bank 4, Mar Balance c/d 7,287 42,039 42,039 5 Dr administration expenses control account Cr 1 Apr Prepaid expenses (reversal) Mar Statement of profit or loss 15,150 Administration expenses day book *14, Mar Accrued expenses 210 * net of VAT 15,150 15,150

6 7 0 f i n a l a c c o u n t s p r e p a r a t i o n t u t o r i a l 6 JoHn anstey, trading as 'electroparts' statement of profit or loss for the year ended 31 march 20-8 Sales revenue 196,400 Less Sales returns 1,560 Net sales 194,840 Opening inventory 24,400 Purchases 135, ,000 Less Closing inventory 28,400 Cost of sales 131,600 gross profit 63,240 Add income: Discounts received ,860 Less expenses: Administration expenses 15,150 Loss on disposal of fixtures and fittings 375 Depreciation charge: fixtures and fittings *1,250 Wages 18,280 35,055 profit for the year 28,805 *note Fixtures and fittings at cost on 1 April ,000 Less cost price of fixtures and fittings sold 30 September ,500 Fixtures and fittings at cost on 31 March ,500 Depreciation charge at 10% 1,250

7 i n c o m p l e t e r e c o r d s a c c o u n t i n g 71 7 JoHn anstey, trading as 'electroparts' statement of FInanCIal position as at 31 march 20-8 non-current assets Cost accumulated Carrying depreciation amount Fixtures and fittings 12,500 *8,250 4,250 Current assets Inventory 28,400 Trade receivables 48,048 Bank 1,100 Total current assets 77,548 Current liabilities Trade payables 38,306 Value Added Tax 7,287 Accrual of administration expenses 210 Total current liabilities 45,803 net current assets 31,745 net assets 35,995 Financed by: Capital Opening capital (from assets and liabilities at 1 April 20-7) 22,580 Add Profit for the year 28,805 51,385 Less Drawings 15,390 Closing capital 35,995 *note Accumulated depreciation of fixtures and fittings at 1 April ,500 Less accumulated depreciation on asset sold 500 7,000 Depreciation charge for year (see statement of profit or loss) 1,250 Accumulated depreciation of fixtures and fittings at 31 March ,250

(Accrual and Prepayment)

(Accrual and Prepayment) Accrual and Prepayment Longman Question 13 The following balances were extracted from the ledgers of Mr Ko at 31 March 2014: $ Telephone 12,355 Dr Rent and rates 55,000 Dr Loan to Bob 450,000 Dr Rental