UNIT 18

VERTICAL BALANCE SHEETS AND END-OF-YEAR

FINANCIAL STATEMENTS OF A SERVICE BUSINESS
Question 1

Balance Sheet at 31 December 2012

$ $ $ $
NON-CURRENT ASSETS Cost Total Net
Deprcn
Equipment and furniture 60 000 30 000 30 000
Vehicles 50 000 28 000 22 000
110 000 58 000 52 000
CURRENT ASSETS
Inventory 25 000
Trade receivables 17 000
Less provision for doubtful debts (500)
16 500
Prepayments 1 500
Cash at bank 2 000
45 000
less CURRENT LIABILITIES
Trade payables 14 000
Accruals 2 000
(16 000)
NET CURRENT ASSETS (working capital) 29 000
81 000
less NON-CURRENT LIABILITIES
Bank loan (15 000)
66 000
CAPITAL
Opening balance 60 000
Profit 38 000
98 000
Drawings (32 000)
66 000
Question 2

Balance Sheet at 31 March 2012

$ $ $ $
NON-CURRENT ASSETS Cost Total Net
Deprcn
Premises 290 000 58 000 232 000
Vehicles 80 000 30 000 50 000
370 000 88 000 282 000
CURRENT ASSETS
Inventory 21 800
Trade receivables 22 000
Less provision for doubtful debts (1 100)
20 900
Prepayments 600
43 300
CURRENT LIABILITIES
Trade payables 17 200
Accruals 900
Bank overdraft 3 600
(21 700)
NET CURRENT ASSETS (working capital) 21 600
303 600
less NON-CURRENT LIABILITIES
Bank loan (32 000)
271 600
CAPITAL
Opening balance 321 200
Loss (14 700)
306 500
Drawings (34 900)
271 600
Question 3
Aquasupreme Ltd
Income Statement for the year ended 31 December 2012
$ $ $
Revenue 309 340
Opening inventory 33 000
Purchases 184 400
217 400
Closing inventory (36 400)
Cost of sales (181 000)
Gross profit 128 340
Add income:
Discounts received 310
128 650
Less expenses
Administration expenses 11 470
Discounts allowed 280
Insurance 2 570
Increase in provision for doubtful debts 150
Rent 13 490
Wages and salaries 67 800
Depreciation of non-current assets 21 150
116 910
Profit for year 11 740
Note: Increase in provision for doubtful debts is old provision $940 − old provision $790 = $150
Balance Sheet at 31 December 2012
$ $ $ $
NON-CURRENT ASSETS Cost Total Net
Deprcn
Goodwill 40 000
Other non-current assets 84 600 63 450 21 150
CURRENT ASSETS 61 150
Inventory 36 400
Trade receivables 18 800
Less provision for doubtful debts (940)
17 860
Prepayments 170
Cash at bank 3 720
58 150
CURRENT LIABILITIES
Trade payables 23 290
Accruals 390
(23 680)
NET CURRENT ASSETS (Working capital) 34 470
95 620
CAPITAL
Opening balance 115 380
Profit 11 740
127 120
Drawings (31 500)
95 620
Question 4

Hosein & Co
Income Statement (Trading Account)
for the year ended 31 May 2012
$ $ $
Sales 341 000
less sales returns (1 640)
339 360
Opening inventory 14 330
Purchases 224 360
less purchases returns (2 220)
222 140
236 470
Closing inventory (11 840)
Cost of sales (224 630)
Gross profit 114 730
Add income:
Decrease in provision for doubtful debts 50
114 780
Less expenses
Bank loan interest 1 310
Electricity 2 080
General expenses 2 720
Salaries 84 230
Water charges 2 250
Depreciation of non-current assets 15 000
(107 590)
Profit for the year 7 190

Balance Sheet at 31 May 2012

$ $ $ $
NON-CURRENT ASSETS Cost Total Net
Deprcn
Goodwill 15 000
Other non-current assets 75 000 30 000 45 000
60 000
CURRENT ASSETS
Inventory 11 840
Trade receivables 4 890
Less provision for doubtful debts 220
4 670
Prepayments 440
16 950
CURRENT LIABILITIES
Trade payables 18 300
Accruals 780
Bank overdraft 320
19 400
NET CURRENT LIABILITIES (Working capital) (2 450)
57 550
less NON-CURRENT LIABILITIES
Bank loan (14 000)
43 550
CAPITAL
Opening balance 65 220
Profit 7 190
72 410
Drawings (28 860)
43 550

Question 5

“Sorted”
Income Statement for the year ended 30 September 2012
$ $
Revenue 249 500
Electricity 4 010
Insurance 1 730
Manager’s salary 38 800
Office expenses 4 190
Rent 13 740
Staff wages 70 560
Depreciation of non-current assets 7 220
140 250
Profit for year 109 240

Question 6

Fay
Income Statement for the year ended 30 June2012
$ $
Revenue 173 200
Add income:
Decrease in provision for doubtful debts 230
173 430
Less expenses
Advertising charges 730
Bad debts 380
Insurance 1 470
Travelling expenses 790
Wages 48 870
Depreciation of non-current assets 9 125
(61 365)
Profit for year 112 065
Question 7

“Venus Beauty Studios”

Income Statement for the year ended 31 May 2012

$ $
Revenue (receipts from customers) 192 990
Add income:
Profit from sale of old equipment 270
193 260

Electricity 8 810
General expenses 8 950
Materials (cosmetics etc) 25 320
Rent 18 780
Wages of assistants 66 370
Water charges 7 740
Depreciation of non-current assets 18 480
(154 450)
Profit for year 38 810

Note: Depreciation is $14 000 (equipment) + $4 480 (furniture and fittings) = $18 480

Balance Sheet at 31 May 2011

$ $ $ $
NON-CURRENT ASSETS Cost Total Net
Deprcn
Equipment 56 000 28 000 28 000
Furniture and fittings 28 000 10 080 17 920
84 000 38 080 45 920
CURRENT ASSETS
Prepayments 490
Cash at bank 8 580
9 070
CURRENT LIABILITIES
Trade payables 1 820
Accruals 630
(2 450)
NET CURRENT ASSETS (Working capital) 6 620
52 540
CAPITAL
Opening balance 45 580
Profit 38 810
84 390
Drawings (31 850)
52 540
Question 8

“Zamran’s Taxis”
Income Statement for the year ended 31 July 2012

$ $
Revenue (receipts from customers) 174 330
Less expenses:
Drivers’ wages 96 870
Insurance 13 480
Office expenses 5 570
Loan interest 3 320
Loss on sale of vehicle 760
Rent 22 240
Vehicle fuel charges 22 730
Vehicle repairs 5 610
Depreciation of non-current assets 32 500
(203 080)
Loss for year 28 750

Note: Depreciation is $3 700 (furniture and equipment) + $28 800 (vehicles) =

$32 500

Balance Sheet at 31 July 2012

$ $ $
NON-CURRENT ASSETS Cost Total Net
Deprcn
Goodwill 25 000
Vehicles 180 000 64 800 115 200
Furniture and equipment 18 500 7 400 11 100
198 500 72 200 151 300
CURRENT ASSETS
Trade receivables 770
Prepayments 860
Cash in hand 460
2 090
CURRENT LIABILITIES
Trade payables 640
Accruals 1 450
Bank overdraft 4 510
(6 600)
NET CURRENT LIABILITIES (Working capital) (4 510)
146 790
less NON-CURRENT LIABILITIES
Bank loan (50 000)
96 790
CAPITAL
Opening balance 167 120
Loss (28 750)
138 370
Drawings (41 580)
96 790