CHAPTER 6

PREPARING SIMPLE INCOME STATEMENTS

Question 1

(a) Calculation of gross profit

$
Revenue 16 300
less Purchases (7 500)
Gross profit 8 800

(b) Calculation of Profit

$
Gross profit 8 800
less total expenses (4 200)
Profit 4 600

(c) Bank Account for February 2014

Dr Bank account Cr
Feb Balance 2 300 Feb Purchases 7 500
Sales 16 300 Rent 2 500
Wages of assistant 900
Insurance 800

(d) Statement of financial position at 28 February 2014

Statement of financial position

at 28 February 2014
$
ASSETS
Fittings 19 400
Equipment 6 200
Bank 6 900
32 500
$
CAPITAL 30 600

LIABILITIES
Trade payables 1 900
32 500

Question 2

(a) Calculation of gross profit

$
Revenue 22 500
less Purchases (11 800)
Gross profit 10 700
(b) Calculation of Profit

$
Gross profit 10 700
less total expenses (5 600)
Profit 5 100

(c) Bank Account for June 2014

Dr Bank account Cr
June Balance 3 500 June Purchases 11 800
Sales 22 500 Wages 4 200
Light and heat 500
Administration expenses 900

(d) Statement of financial position at 30 June 2014

Statement of financial position

at 30 June 2014
$
ASSETS
Shop premises 92 000
Vehicle 18 000
Bank 8 600
118 600
$
CAPITAL 93 600

LIABILITIES
Bank loan 25 000
118 600

Question 3

(a) Calculation of gross profit

$
Revenue 9 900
less Purchases (3 200)
Gross profit 6 700

(b) Calculation of Profit

$
Gross profit 6 700
less total expenses (2 100)
Profit 4 600

(c) Ledger accounts

Dr Equipment account Cr
Aug 1 Balance 11 600

Dr Furniture account Cr
Aug 1 Balance 10 500
Dr Bank account Cr
Aug 1 Balance 2 900 Aug Purchases 3 200
Sales 9 900 Wages 800
Rent 700
Light and heat 600

Dr Capital account Cr
Aug 1 Balance 23 900
31 Income statement 4 600

Dr Trade payables account Cr

Aug 1 Balance 1 100

Dr Sales account Cr
Aug 31 Income statement 9 900 Aug Bank 9 900

Dr Purchases account Cr
Aug Bank 3 200 Aug 31 Income statement 3 200

Dr Wages account Cr
Aug Bank 800 Aug 31 Income statement 800

Dr Rent account Cr
Aug Bank 700 Aug 31 Income statement 700

Dr Light and heat account Cr

Aug Bank 600 Aug 31 Income statement 600

(d) Income statement (first part)

Income statement for the month

ended 31 August 2014
$
Revenue 9 900
Purchases (3 200)
Gross profit 6 700

(e) Income statement (second part) and (f) transfer of Profit to capital

Income statement for the month ended

31 August 2014
$ $
Gross profit 6 700
Less expenses
Wages 800
Rent 700
Light and heat 600
(2 100)
Profit 4 600
(g) Statement of financial position at 31 August 2014

Statement of financial position

at 31 August 2014
$
ASSETS
Equipment 11 600
Furniture 10 500
Bank 7 500
29 600
$
CAPITAL 28 500

LIABILITIES
Trade payables 1 100
29 600

Question 4

(a) Calculation of gross profit

$
Revenue 10 300
less Purchases (2 100)
Gross profit 8 200

(b) Calculation of Profit

$
Gross profit 8 200
less total expenses (2 000)
Profit 6 200

(c) Ledger accounts

Dr Premises account Cr
Sept 1 Balance 65 000

Dr Equipment account Cr
Sept 1 Balance 12 200

Dr Bank account Cr
Sept 1 Balance 4 400 Sept Purchases 2 100
Sales 10 300 Insurance 700
Loan interest 200
Wages 1 100

Dr Capital account Cr
Sept 1 Balance 73 600
30 Income statement 6 200

Dr Bank loan account Cr

Sept 1 Balance 8 000
Dr Sales account Cr
Sept 30 Income statement 10 Sept Bank 10
300 300

Dr Purchases Cr
Sept Bank 2 100 Sept 30 Income statement 2 100

Dr Insurance account Cr
Sept Bank 700 Sept 30 Income statement 700

Dr Loan Interest account Cr

Sept Bank 200 Sept 30 Income statement 200

Dr Wages account Cr
Sept Bank 1 100 Sept 30 Income statement 1 100

(d) Income statement (first part)

Income statement for the month

ended 30 September 2014
$
Revenue 10 300
Purchases (2 100)
Gross profit 8 200

(e) Income statement (second part) and (f) transfer of Profit to capital

Income statement for the month ended

30 September 2014
$ $
Gross profit 8 200
Less expenses
Insurance 700
Loan interest 200
Wages 1 100
(2 000)
Profit 6 200

(g) Statement of financial position at 30 September

Statement of financial position

at 30 September 2014
$
ASSETS
Premises 65 000
Equipment 12 200
Bank 10 600
87 800
$
CAPITAL 79 800

LIABILITIES
Bank loan 8 000
87 800
Question 5

(a) Calculation of gross profit

$
Revenue 7 700
less Purchases (5 300)
Gross profit 2 400

(b) Calculation of loss

$
Gross profit 2 400
less total expenses (3 000)
Loss (600)

(c) Ledger accounts

Dr Furniture account Cr
July 1 Balance 11 200

Dr Equipment account Cr
July 1 Balance 3 200

Dr Bank account Cr
July 1 Balance 1 800 July Purchases 5 300
Sales 7 700 Rent 1 100
Light and heat 600
Wages 1 300

Dr Capital account Cr
July 31 Income statement 600 July 1 Balance 13 600

Dr Trade payables Cr
July 1 Balance 2 600

Dr Sales account Cr
July 31 Income statement 7 700 July Bank 7 700

Dr Purchases account Cr
July Bank 5 300 July 31 Income statement 5 300

Dr Rent account Cr
July Bank 1 100 July 31 Income statement 1 100

Dr Light and heat account Cr

July Bank 600 July 31 Income statement 600

Dr Wages account Cr
July Bank 1 300 July 31 Income statement 1 300
(d) Income statement (first part)

Income statement for the month

ended 31 July 2014
$
Revenue 7 700
Purchases (5 300)
Gross profit 2 400

(e) Income statement (second part) and (f) transfer of Loss to capital

Income statement for the month ended

31 July 2014
$ $
Gross profit 2 400
Less expenses
Rent 1 100
Light and heat 600
Wages 1 300
(3 000)
Loss (600)

(g) Statement of financial position at 31 July 2014

Statement of financial position

at 31 July 2014
$
ASSETS
Furniture 11 200
Equipment 3 200
Bank 1 200
15 600
$
CAPITAL 13 000

LIABILITIES
Trade payables 2 600
15 600

Question 6

(a) Calculation of gross profit

$
Revenue 12 900
less Purchases (9 200)
Gross profit 3 700

(b) Calculation of loss

$
Gross profit 3 700
less total expenses (5 200)
Loss (1 500)
(c) Ledger accounts

Dr Premises account Cr
April 1 Balance 105 000

Dr Equipment account Cr
April 1 Balance 16 000

Dr Bank account Cr
April 1 Balance 2 700 April Purchases 9 200
Sales 12 900 Wages 3 100
Administration exp. 1 300
Loan interest 800

Dr Capital account Cr
April 30 Income statement 1 500 April 1 Balance 83 700

Dr Bank loan account Cr

April 1 Balance 40 000

Dr Sales account Cr
April 30 Income statement 12 900 April Bank 12 900

Dr Purchases account Cr
April Bank 9 200 April 30 Income statement 9 200

Dr Wages account Cr
April Bank 3 100 April 30 Income statement 3 100

Dr Administration expenses account Cr

April Bank 1 300 April 30 Income statement 1 300

Dr Loan interest account Cr

April Bank 800 April 30 Income statement 800

(d) Income statement (first part)

Income statement for the month

ended 30 April 2014
$
Revenue 12 900
Purchases (9 200)
Gross profit 3 700

(e) Income statement (second part) and (f) transfer of Loss to capital

Income statement for the month ended

30 April 2014
$ $
Gross profit 3 700
Less expenses
Wages 3 100
Administration 1 300
Loan interest 800
(5 200)
Loss (1 500)
(g) Statement of financial position at 30 April 2014

Statement of financial position

at 30 April 2014
$
ASSETS
Premises 105 000
Equipment 16 000
Bank 1 200
122 200
$
CAPITAL 82 200

LIABILITIES
Bank loan 40 000
122 200

Question 7
(a)

Dr Administration expenses account Cr

Dec 1 Balance 8 250 Dec 31 Income statement 8 690
17 Cash 440

Dr Bank account Cr
Dec 1 Balance 3 190 Dec 2 Purchases 2 200
30 Cash 6 200 8 Rent 1 250
10 Bank loan 500
22 Trade payables 2 600
23 Fittings 970

Dr Bank loan account Cr

Dec 10 Bank 500 Dec 1 Balance 8 000

Dr Capital account Cr
Dec 31 Drawings 21 810 Dec 1 Balance 31 870
31 Income statement 7 990

Dr Cash account Cr
Dec 1 Balance 340 Dec 15 Wages 1 620
3 Sales 5 220 16 Drawings 600
6 Trade receivables 330 17 Administration
20 Sales 3 130 expenses 440
29 Sales 2 440 28 Wages 1 880
30 Bank 6 200

Dr Drawings account Cr
Dec 1 Balance 21 210 Dec 31 Capital 21 810
16 Cash 600

Dr Fittings account Cr
Dec 1 Balance 8 920
23 Bank 970

Dr Loan interest account Cr

Dec 1 Balance 640 Dec 31 Income statement 640
Dr Trade payables account Cr
Dec 22 Bank 2 600 Dec 1 Balance 3 480

Dr Purchases account Cr
Dec 1 Balance 83 470 Dec 31 Income statement 85 670
2 Bank 2 200

Dr Trade receivables account Cr

Dec 1 Balance 570 Dec 6 Cash 330
13 Sales 210

Dr Rent account Cr
Dec 1 Balance 13 230 Dec 31 Income statement 14 480
8 Bank 1 250

Dr Sales account Cr
Dec 31 Income statement 152 Dec 1 Balance 141 300
300
3 Cash 5 220
13 Trade receivables 210
20 Cash 3 130
29 Cash 2 440

Dr Vehicle account Cr
Dec 1 Balance 13 500

Dr Wages account Cr
Dec 1 Balance 31 330 Dec 31 Income statement 34 830
15 Cash 1 620
28 Cash 1 880

(b)
Trial Balance at 31 December 2014
Dr Cr
$ $
Administration expenses 8 690
Bank 1 870
Bank loan 7 500
Capital 31 870
Cash 720
Drawings 21 810
Fittings 9 890
Loan interest 640
Trade payables 880
Purchases 85 670
Trade receivables 450
Rent 14 480
Sales/Revenue 152 300
Vehicle 13 500
Wages 34 830
192 550 192 550
(c)
Income statement for the year ended
31 December 2014
$ $
Revenue 152 300
Less Purchases (85 670)
Gross profit 66 630
Less expenses
Administration expenses 8 690
Loan interest 640
Rent 14 480
Wages 34 830
(58 640)
Profit 7 990

(d) see ‘Capital account’ in part (a)

(e)

Statement of financial position

at 31 December 2014
$ $
NON-CURRENT ASSETS
Vehicle 13 500
Fittings 9 890
23 390
CURRENT ASSETS
Trade receivables 450
Bank 1 870
Cash 720
3 040
26 430
$ $
CAPITAL 18 050

NON-CURRENT
LIABILITIES
Bank loan 7 500

CURRENT LIABILITIES
Trade payables 880
26 430
Question 8
(a)

Dr Bank account Cr
March 1 Balance 4 530 March 11 Bank loan 800
24 Cash 2 500 16 Insurance 470
28 Sales 3 750 17 Equipment 2 000
21 Loan interest 140
25 Trade payables 4 500
30 Drawings 820

Dr Bank loan account Cr

March 11 Bank 800 March 1 Balance 24 000

Dr Capital account Cr
March 31 Drawings 25 330 March 1 Balance 94 140
31 Income statement 48 310

Dr Cash account Cr
Dec 1 Balance 820 March 4 Wages 2 270
2 Sales 4 840 7 Drawings 630
23 Sales 3 990 22 Wages 2 490
24 Bank 2 500

Dr Drawings account Cr
March 1 Balance 23 880 March 31 Capital 25 330
7 Cash 630
30 Bank 820

Dr Equipment account Cr
March 1 Balance 18 500
17 Bank 2 000

Dr Insurance account Cr
March 1 Balance 8 440 March 31 Income statement 8 910
16 Bank 470

Dr Loan interest account Cr

March 1 Balance 1 850 March 31 Income statement 1 990
21 Bank 140

Dr Trade payables account Cr

Dec 25 Bank 4 500 March 1 Balance 7 880
9 Purchases 3 600

Dr Premises account Cr
March 1 Balance 95 000

Dr Purchases Cr
March 1 Balance 120 480 March 31 Income statement 124 080
9 Trade payables 3 600

Dr Trade receivables account Cr

March 1 Balance 5 290
14 Sales 4 300
Dr Sales account Cr
March 31 Income statement 233 March 1 Balance 216 480
360
2 Cash 4 840
14 Receivables 4 300
23 Cash 3 990
28 Bank 3 750

Dr Vehicle account Cr
March 1 Balance 18 400

Dr Wages account Cr
March 1 Balance 45 310 March 31 Income statement 50 070
4 Cash 2 270
22 Cash 2 490

(b)
Trial Balance at 31 March 2014
Dr Cr
$ $
Bank 2 050
Bank loan 23 200
Capital 94 140
Cash 1 760
Drawings 25 330
Equipment 20 500
Insurance 8 910
Loan interest 1 990
Trade payables 6 980
Premises 95 000
Purchases 124 080
Trade receivables 9 590
Sales/Revenue 233 360
Vehicle 18 400
Wages 50 070
357 680 357 680

(c)
Income statement for the year ended
31 March 2014
$ $
Revenue 233 360
Less Purchases (124 080)
Gross profit 109 280
Less expenses
Insurance 8 910
Loan interest 1 990
Wages 50 070
(60 970)
Profit 48 310

(d) See ‘Capital account’ in part (a)

(e)

Statement of financial position at 31 March 2014

$ $
NON-CURRENT ASSETS
Premises 95 000
Equipment 20 500
Vehicle 18 400
133 900
CURRENT ASSETS
Trade receivables 9 590
Bank 2 050
Cash 1 760
13 400
147 300
$ $
CAPITAL 117 120

NON-CURRENT
LIABILITIES
Bank loan 23 200

CURRENT LIABILITIES
Trade payables 6 980
147 300