1.

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDING 31/12/2022

DR CR
Sales 314330
Less cost of sales
Opening stock 8240
add purchases 185600
193840
closing stock
less 4800 189040
gross profit 125290
discount received 320
125610
expenses
less
rent 6800
(460)
wages and salaries 62800
680 6340
discount allowed 63480
allowance for doubtful debts 1640
vehicle running cost 1230 182
144
bad debts 1374
Depreciation 1460
Office furniture
Vehicle 760 78736
Net profit 3500 46874
1.b. BALANCE SHEET AS AT 31/12/2022
Fixed Cost Cost Depreciation Net book value
Vehicle 7500 3500 4000
Office furniture 5800 760 5040
9040

Current assets
Stock 4800
Debtors 24632
less paid for doubtful debts 992 23640
prepared rent 460
bank 8200 37100
46140
Financed By
Capital 22800
add net profit 46874
69674
less Drawings 34200
35450
current liabilities
trade payable 10490
accruals: wages & salaries 680
vehicle running cost 144 824
46140
11314

a. JOURNALS DR CR
Purchases 800
Suspense 800
Being entry to correct purchases under casted by 800

b. JOURNALS DR CR
Suspense 600
Rent 600
Being entry to correct an error of compensation

c. JOURNALS DR CR
Return Inwards 112.50
Suspense 112.50
Complete reversal entry being corrected
d. JOURNALS DR CR
Discount Allowed 1050
Suspense 1050
Being entry to correct error of commission

e.
JOURNALS DR CR
Suspense 900
Sales 900
Being entry to show sales being under casted by 900

f.
JOURNALS DR CR
Check 475
Suspense 475

g.
JOURNALS DR CR
Bank 250
Suspense 250
Being entry to correct bank under costed by 250

h.
JOURNALS DR CR
Expenses 100
Suspense 100

2.b. Suspense a/c

Balance b/d 1800 Purchases 800

Rent 1000 Return inwards 112.50
Sales 900 Discount allowed 1050
Cheque 475
Sales 250
Expenses 1000
 3.a Differences between Cash Discounts and Trade Discounts

The differences between cash discounts and trade discounts are discussed below:

Based on Aim: Cash discounts are more like a negotiation process that initiates the buyer to make
payments before the due date. Trade discounts are more like a way to retain business by initiating
the buyer to buy products in bulk quantities and become a regular customer.

Based on Source: A cash discount is given by the seller to the buyer when the buyer is making a
purchase transaction. It is not known in advance but decided more on an instant basis. A trade
discount is given by the seller to the buyer when the buyer is buying goods as per the discount policy
of the seller.

Based on Accounting: Cash discounts are recorded on the debit side of the cash book. Trade
discounts are not recorded in the books as the net amount payable is calculated after reducing the
discounted amount from the invoice.

Based on Significance: A cash discount is given when the buyer initiates payment before the due
date. A trade discount is given by the seller as a decrease in the listed price of the product.

Based on Timing: A cash discount is implemented when the buyer initiates payment. A trade
discount is implemented when a buyer is initiating an order for purchase.

3b(ii) UPDATED CASHBOOK

DR CR
Date Date
Dec 31 Bal c/d 10311 Dec 31 bank charges 141
N. Mejury 279 Bal c/d 10449
10590 10590
Bal b/d 10449

3b(ii) BANK RECONCILIATION STATEMENT AS ON 31 DEC 2018

Bal as per bank statement 9381

Add underposted cheque B.Taurai 957
S.Moly 738 1695
11076
Less Unpresented Cheque P.Ranga (627)
10449
3.C DIFFERENCE BETWEEN A PRIVATE LIMITED COMPANY AND PUBLIC LIMITED COMPANY

Ownership and Shareholders: A private limited company is owned by a small group of shareholders,
often family members or a close-knit group, and the ownership is not publicly traded. On the other
hand, a public limited company has a large number of shareholders, and its shares are listed on a
stock exchange, which allows the general public to buy and sell shares of the company.

Minimum and Maximum Number of Shareholders: A private limited company must have a
minimum of 2 shareholders and a maximum of 200 shareholders, whereas there is no maximum
limit on the number of shareholders for a public limited company.

Capital and Fundraising: A private limited company can be formed with a relatively lower amount of
capital and may not be required to disclose its financial information to the public. In contrast, a
public limited company generally requires a higher minimum capital, and it is legally required to
publish its financial information for public scrutiny. Public limited companies can also raise capital by
issuing shares to the general public through the stock exchange, while private limited companies
typically raise funds through private sources or limited to a small group of investors.

Transferability of Shares: In a private limited company, the transfer of shares is restricted and
requires the approval of existing shareholders, whereas shares of a public limited company are freely
transferable without the need for consent from other shareholders.

Disclosure and Compliance Requirements: Private limited companies have fewer disclosure and
compliance requirements compared to public limited companies. Public limited companies are
subject to more stringent regulations, including regular financial audits, filing of annual reports, and
compliance with stock exchange rules and regulations.

Decision-making and Management: In a private limited company, decision-making is usually quicker

and more flexible, as it is typically controlled by a smaller group of shareholders. In a public limited
company, decision-making may be more complex and time-consuming, as it involves a larger
number of shareholders and may require compliance with various regulatory and legal
requirements.

Public Image and Perception: Public limited companies often have a higher public profile and
perception, as they are listed on stock exchanges and subject to more regulatory scrutiny. Private
limited companies, on the other hand, may have a lower public profile and perception, as their
financial information and operations are not publicly disclosed.

Legal Formalities: The legal formalities involved in the formation and operation of a private limited
company are relatively simpler and less stringent compared to a public limited company. Private
limited companies have more flexibility in terms of their internal governance and operational
procedures, whereas public limited companies are subject to more regulatory requirements and
formalities.

Privacy and Confidentiality: Private limited companies generally enjoy more privacy and
confidentiality in their operations, as their financial information and business activities are not
publicly disclosed. On the other hand, public limited companies are required to disclose a significant
amount of information to the public, including financial statements, annual reports, and other
regulatory filings, which may affect their privacy and confidentiality.

Access to Capital Markets: Public limited companies have the advantage of accessing capital
markets for raising funds through the issuance of public shares and bonds, which can provide them
with more significant opportunities for growth and expansion. Private limited companies, on the
other hand, have limited options for raising capital, as they cannot issue public shares or bonds and
are typically reliant on private funding sources.

Shareholder Liability: In a private limited company, the liability of shareholders is limited to the
extent of their investment in the company. Their personal assets are protected in case of any
business liabilities. In a public limited company, shareholders also enjoy limited liability, but the
company's shares are publicly traded, and the risk of shareholders facing liability for any wrongdoing
or fraud by the company may be higher due to public scrutiny and regulatory requirements.

Exit Strategy: Exit options for shareholders may differ between private and public limited
companies. In a private limited company, it may be relatively more challenging to exit or sell shares,
as the shares are not publicly traded, and there may be restrictions on share transfer. In contrast,
public limited company shares can be freely traded in the stock market, providing shareholders with
more liquidity and exit options.

Governance Structure: Public limited companies typically have a more formalized governance
structure, with a board of directors, independent directors, and various board committees
mandated by law. Private limited companies may have more flexibility in their governance structure
and may not be required to have the same level of formalization.