Professional Documents
Culture Documents
Introduction
When a full set of accounting records is maintained the owner of the business has all the information available
about the assets, liabilities, revenues and expenses of the business. This makes the preparation of financial
statements relatively easy. Sometimes businesses, small businesses in particular, do not maintain a full set of
accounting records. This means that a trail balance cannot be drawn up and the financial statements cannot
be prepared until a certain amount of preparatory calculations have been carried out. Much depends on the
records and information available as to whether a full set of financial statements can be prepared.
Statement of Affairs
If the only records available are those relating to the assets and liabilities of the business it is not possible to
prepare an income statement. These assets and liabilities are listed in a statement of affairs which is similar to a
balance sheet.
When a list of assets and liabilities is prepared without the use of a set of double entry records it is
known as a Statement of Affairs rather than a balance sheet.
If the assets, liabilities and capital of the business are known and no further information is available, the only way in
which the profit can be measured is to compare the change in the capital over the financial period. Capital
increases when a profit is made and decreases when a loss is incurred. The basic formula for calculating profit is:
Closing
capital
- Opening
capital
= Profit
Part of the difference between the two capital figures may be caused by drawings made by the owner. If the
drawings have taken during the period, the formula must be modified to :
Closing
capital
- Opening
capital
+ Drawings = Profit
If additional capital had been introduced during the period, this will also account for some of the difference between
the two capital figures. The formula must be modified to:
Closing - Opening
capital + Drawings - Capital
introduced = Profit
capital
Calculating profit by comparing the change in the capital is very unsatisfactory. Only an estimate of the profit
for the year is possible: it is not possible to show details about gross profit, sales, purchases, expenses and so
on. It is not possible to analyse the results and informed decisions about the future cannot be made.
Question 1
Vijay is a sole trader. He has not kept a full set of double entry records, but is able to provide the following
information about his assets and liabilities.
1 May 2008 30 April 2009
$ $
Premises at cost 30 000 30 000
Equipment at cost 9 000 9 000
Motor vehicle at cost 8 000 8 000
Inventory 14 000 16 000
Trade receivables 8 500 9 400
Trade payables 8 000 9 200
Bank 1 200 -
Bank overdraft - 900
Other payables - 100
Other receivables 120 130
During the year ended 30 April 2009 Vijay purchase additional equipment for the business, costing $7000, out
of his personal funds. This is in addition to the equipment listed above. His cash drawings during the year
amounted to $7000, and he also took goods costing $3000 for personal use.
On 30 April 2009 it was decided that all the equipment should be depreciated by 10% and the motor vehicle
should be depreciated by 25%.
It was also decided to create a provision for doubtful debts of 2% of the trade receivables.
REQUIRED
(a) Prepare a statement of affairs of Vijay at 1 May 2008.
Statement of affairs of Vijay at 1 May 2008
Cost Depreciation Book
$ to date $ Value $
(c) Calculate Vijay’s profit for the year ended 30 April 2009.
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Question 2
Anjali is a sole trader. She maintains a bank account, but not a full set of double entry records. She provided
the following information.
1 July 2016 30 June 2017
$ $
Premises at cost 60 000 60 000
Equipment (cost $22 500) 18 000 ?
Inventory 28 100 29 800
Trade receivables 23 800 26 800
Trade payables 19 700 20 200
Other payables (accrued general expenses) 200 -
Other receivables (prepaid general expenses) - 340
Bank 12 700 ?
Receipts $ Payments $
Receipts from trade receivables 331 600 Payments to trade payables 249 400
Cash sales 12 000 General expenses 19 620
Drawings 38 400
Wages 40 000
Property tax 3 800
Insurance 1 900
Equipment 8 000
During the year ended 30 June 2017 Anjali took goods costing $4000 for her own use.
On 30 June 2017 equipment should be depreciated by 10% on the cost of equipment owned at that date. On
that date it was decided to create a provision for doubtful debts of 2.5% of the trade receivables.
©Olhuvelifushi school/Grade 10/2022/2023 Department of Business Page 5
OLHUVELIFUSHI SCHOOL DEPartmenT OF Business
REQUIRED
(a) Prepare the income statement of Anjali for the year ended 30 June 2017 and Statement of financial
position at 30 June 2017.
Before attempting to answer a question of this nature it is necessary to calculate the following:
1 Opening capital
2 Sales for the year
3 Purchases for the year
4 Closing bank balance
Calculations
1 Opening capital
Statement of Affairs as at 1 July 2016
Cost Depreciation Book
$ to date $ Value $
Bank Account
$ $
$ $ $
Question 3
©Olhuvelifushi school/Grade 10/2022/2023 Department of Business Page 9
OLHUVELIFUSHI SCHOOL DEPartmenT OF Business
Anjali is a sole trader. She maintains a bank account, but not a full set of double entry records. She provided
the following information.
1 July 2016 30 June 2017
$ $
Trade receivables 23 800 26 800
Trade payables 19 700 20 200
During the year ended 30 June 2017 receipts from trade receivables totaled $331 600 (after the deduction of
$8200 cash discount), $249 400 was paid to trade payables (after the deduction of $6780 cash discount)
REQUIRED
(a) Calculate the credit sales for the year ended 30 June 2017.
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(b) Calculate the credit purchases for the year ended 30 June 2017.
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Question 4
©Olhuvelifushi school/Grade 10/2022/2023 Department of Business Page 10
OLHUVELIFUSHI SCHOOL DEPartmenT OF Business
$
Cash purchases 4 000
Cheque paid to trade payables 23 300
Trade payable at 1 June 2007 2 500
Trade payable at 31 May 2008 3 100
REQUIRED
(a) Calculate the purchases for the year.
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Question 5
When dealing with incomplete records, it is sometimes necessary to use percentages to calculate missing
information.
Question 6
©Olhuvelifushi school/Grade 10/2022/2023 Department of Business Page 13
OLHUVELIFUSHI SCHOOL DEPartmenT OF Business
A trader’s sales for the year were $20000 and the cost of goods sold was $15000.
REQUIRED
(a) the margin
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Applying the margin and mark up, it is possible to calculate any one unknown figure in the trading account
section of the income statement.
Question 7
The financial year of North West traders ends on 30 November. The following information is provided.
$
Inventory 1 December 2013 4 600
Inventory 30 November 2014 5 200
Revenue 72 000
REQUIRED
Calculate by means of trading account section of an income statement, the purchases for the year ended 30
November 2014.
Income statement for the year ended 30 November 2014
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It is sometimes necessary to use calculations relating to the rate of inventory turnover in order to calculate an
unknown figure in the trading account section of an income statement. The rate of inventory turnover is the
number of times a business replaces its inventory in a given period of time.
The formula for calculating the rate of inventory turnover is:
Cost of Sales
Average inventory
Question 8
M Parmer is a trader. The financial year ends on 31 October. The following information is provided.
$
Inventory 1 November 2011 12 000
Inventory 31 October 2012 8 000
REQUIRED
Calculate by means of trading account section of an income statement, the purchases for the year ended 31
October 2012.
Income statement for the year ended 31 October 2012
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Question 9
Paula Lim supplied the following information relating to her financial year ended 30 April 2010.
$
Revenue (sales) 250 000
Inventory (stock) 1 May 2009 10 000
Inventory (stock) 30 April 2010 25 000
Gross profit to sales 40%
REQUIRED
Calculate the following for the year ended 30 April 2010. Show all your workings.
(a) Cost of sales
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Question 10
Chow is in business buying and selling goods on credit. The following information was available:
$
Cost of sales 300 000
Inventory at 1 October 2011 20 000
Inventory at 30 September 2012 60 000
Expenses 35 000
Mark up 25%
REQUIRED
Calculate the following for the year ended 30 September 2012.
(a) Profit for the year
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