Part A-1: You are required to prepare financial statements for Adam Lee, a sole trader, from a trial

balan
i.e. prepare for Adam Lee a Profit and Loss Account for the year ended 31 May 2023, and a Balance She

The following trial balance was extracted from the ledger of Adam Lee as 31 May 2023 - the end of this

ADAM LEE
TRIAL BALANCE AS AT 31 MAY 2023

£000 £000
Dr Cr
Land and building, at cost 200,000 C
Plant and machinery, at cost 100,000 C
Accumulated depreciation (as at 1 June 2022)
Land and buidling 45,000
Plant and machinery 30,000
Sales R 496,900
Purchases 251,000 R
Inventory (as at 1 June 2022) 50,000 C
Discount received R 4,800
Purchase returns R 15,000
Wages and salaries 58,800 R
Loan interest 5,100 R
Other opearaing expenses 17,700 R
Trade paybles C 36,000
Trade receivables 42,600 C
Cash in hand 300 C
Cash at bank 30,000 C
Drawings 24,000 D
Allowance for doubful debts at 1 June 2019 500
17% long-term loan 30,000
Capital, as at 1 June 2019 C 121,300
779,500 779,500

The following additional information as at 31 May 2023 is available:

1. Inventory at ar the close of business has been valued at cost at £75,000.
2. Wages and salaries need to be accrued by £2,800.
3. Other operating expenses are prepaid by £3,000
4. A bad debt of £10,600 included in the trade receivables balance of £42,600 is to be written off.
5. The allowance of doubful debts is to be adjusted so that it is 2% of trade receivables.
6. Depreciation of the year ended 31 May 2023 has still to be provided for as follows:
* Land and building: 1.5% per annum using the straight line method.
* Plant and machinery: 25% per annum using the reducing balance method.
Required:
(1) Prepare Adam Lee's Statement of profit or loss and Statement of retained earnings for the year ended
(2) Prepare his statement of financial position as at that date.

Guidances:
Step 1: Identify and insert against each balance C for capital items, R for revenue items, D for Drawings
Step 2: Use additional information from scenario to identify what adjustment should be made, then adju
Working 1: Inventory
Working 2: Accruals
Working 3: Prepayments
Working 4: Bad debts
Working 5: Allowance for doubful debts
Working 6: Depreciation
Step 3: Create a format of Statement of profit or loss and Statement of financial position; and use the wo
and information from the trial balance to complete these statements. (Referencing the format exanple in

ADAM LEE
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MAY 2023

£000 £000
Sales
…
..
..
…
..
Net profit for the year

ADAM LEE
STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED 31 MAY 2023

£000
…
…
..
Retained Earnings

ADAM LEE
STATEMENT OF FINANCIAL POSITION AT 31 MAY 2023

£000 £000
Non-current assets Cost Accumulated depreciation
…
..
..
..
Current assets
…
…
..
..
Total asset

Equity
…
…
…
…
Non-current liabilities
…
…
..
Current liabilities
…
..
..
..
Total equity and liabilities
sole trader, from a trial balance, making appropriate adjustments,
May 2023, and a Balance Sheet as at that date.

1 May 2023 - the end of this financial year.

00 is to be written off.
eceivables.
d earnings for the year ended 31 May 2023

venue items, D for Drawings

nt should be made, then adjust them.

Referencing Example
cial position; and use the workings described in Step 2,
encing the format exanple included in this file)

DED 31 MAY 2023

NDED 31 MAY 2023

MAY 2023

£000
ated depreciation NBV
Part A-2: A range of comparative key performance ratios from the previous year.

Some key performance ratios from the previous year are listed as follows:

ROS
Assets turnover
Inventories turnover
Account receivable turnover
Account payable turnover
ROA
RE
ROE
Current ratio
Quick ratio
Cash ratio
Debt ratio
Long-term debt to long-term capital ratio
Long-term debt to shareholder’s equity ratio
ICR
Referencing Example (Chapter 2 Part 3)
e key performance ratios from the previous year.

m the previous year are listed as follows:

quity ratio
 12%
2.01
7.88
10.10
7.00
20%
22%
38%
2.02
1.51
0.55
0.45
0.20
0.22
11.90
- Sales Return (Return Inwards; Return
- Purchase Return (Return Outwards; R
- Discount Received : Chiết khấu m
- Discount Allowed : Chiết khấu bá
- Carriage Inwards : Chi phí vận chuyện
- Carriage Outwards : Chi phí vận chuy
urn (Return Inwards; Return In) : Hàng bán trả lại. Hàng hóa doanh nghiệp bị trả lại bởi khách hàng
Return (Return Outwards; Return Out) : Hàng mua trả lại. Hàng hóa doanh nghiệp trả lại nhà cung cấp
t Received : Chiết khấu mua hàng . Chiết khấu mua hàng là trường hợp doanh nghiệp mua hàng được nhận sự giả
t Allowed : Chiết khấu bán hàng. Chiết khấu bán hàng là trường hợp doanh nghiệp bán hàng hóa hoặc dịch vụ giả
Inwards : Chi phí vận chuyện hàng vào. Chi phí vận chuyển hàng mua vào doanh nghiệp.
Outwards : Chi phí vận chuyển hàng đi bán. Chi phí vận chuyển hàng đến với khách hàng của doanh nghiệp
ua hàng được nhận sự giảm giá từ người bán
hàng hóa hoặc dịch vụ giảm giá cho khách hàng

oanh nghiệp
 ADAM
STATEMENT OF PROFIT OR LOSS F

Sales
Cost of sales
Opening stock
Purchases
Purchases return
Closing stock
Gross profit
Other income-discounts received

Expenses
Operating expenses
Wages and salaries
Discounts allowed
Irrecoverable debts
Loan interest
Depreciation
Other operating expenses

Net profit for the year

Working 1: Inventory at ar the close of business has been valued at cost at £75,000.
Closing inventory = £75,000
COGS = (opening inventory + purchases) - closing inventory =

Working 2: Wages and salaries need to be accrued by £2,800.

£2,800 will be reported in BS as liabilities
Accruals salaries charged to profit and loss for the year = (Amount of Salaries paid during the year + Closin

Working 3: Other operating expenses are prepaid by £3,000

Closing prepayment : £3,000
Prepaid operating expenses charged to the Income Statement = (Opening Prepayment + Amounts of operati
Calculation results :
Working 4: A bad debt of £10,600 included in the trade receivables balance of £42,600 is to be written
bad debt expenses of £10,600 will be written of ( reported on IS)
Trade Receivable at 31st May 2023 =
Working 5: The allowance of doubful debts is to be adjusted so that it is 2% of trade receivables.
Allowance required for the entire year : =
Increase in allowance charged to profit and loss: =
Working 6: Depreciation of the year ended 31 May 2023 has still to be provided for as follows:
*Land and building :
Land and building at cost:
Depreciation for a year: £200,000 * 1,5% =
Accumulated depreciation at 31st May 2023: opening accumulated depreciation + depreciation = £45,000+
*Plant and machinery
Plant and machinery at cost
Depreciation for a year (£100,000 -£30,000) * 25%=
Accumulated depreciation at 31st May 2023: opening accumulated depreciation + depreciation = £300,000+

ADAM
STATEMENT OF RETAINED EARNING

Net profit
Drawing
Retained Earnings

ADAM
STATEMENT OF FINANCIA

Non-current assets
Land and building
Plant and Machinery

Current assets
Inventory
Trade Receivable
Less; Allowance for doubtful debt
Prepayment
Cash in hand
Cash at bank
Total asset

Equity
Capital
Retained earnings

Non-current liabilities
17% long-term loans

Current liabilities
Trade payables
Accruals

Total equity and liabilities

 ADAM LEE
ATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MAY 2023

50,000
251,000
(15,000)
(75,000)

61,600
10,600
140
5,100
20,500
14,700

at cost at £75,000.
, reported on the balance sheet as a current asset (Inventory)
(£50,000 + £251,000 ) - £75,000 = £226,000, reported as Income Statem

Salaries paid during the year + Closing Accruals) - Opening accruals

= (£58,800 + £2,800)-£0 = £61,600

ing Prepayment + Amounts of operating expenses paid during the year ) - Closing prepayment
(£0 + £17,700)-£3,000 = £14,700
es balance of £42,600 is to be written off.

£42,600-£10,600 = £32,000
at it is 2% of trade receivables.
 £32,000*2% = £640 ; reported on the balance sheet right under trade rece
Allowance required - Opening Allowance: £640-£500 = £140
o be provided for as follows:
1.5% per annum
£200,000
£3,000
preciation + depreciation = £45,000+£3,000 =£48,000
25% per annum
£100,000
£17,500
preciation + depreciation = £300,000+£17,500 = £47,500

ADAM LEE
EMENT OF RETAINED EARNINGS FOR THE YEAR ENDED 31 MAY 2023
£000
178,060
(24,000)
154,060

ADAM LEE
STATEMENT OF FINANCIAL POSITION AT 31 MAY 2023

£000
Cost Accumulated dep
200,000
100,000

32,000
(640)
 ROS
£ Assets turnover
496,900 Inventories turnover
Account receivable tur
Account payable turno
ROA
RE
(211,000) ROE
285,900 Current ratio
4,800 Quick ratio
290,700 Cash ratio
Debt ratio
Long-term debt to long
Long-term debt to shar
ICR

(112,640)
178,060

orted as Income Statement

right under trade receivables

£000 £000
Accumulated depreciation NBV
(48,000) 152,000
(47,500) 52,500
204,500

75,000

31,360
3,000
300
30,000 139,660
 344,160

121,300
154,060 275,360

30,000

36,000
2,800 38,800
68,800
344,160
 p
Assets turnover l
Inventories turnover
Account receivable turnover
Account payable turnover

Current ratio a
Quick ratio
Cash ratio
Debt ratio
Long-term debt to long-term capital ratio
Long-term debt to shareholder’s equity ratio
(Net cash flow from operations + payment for interest and income taxes)/ Cash p
 Formula
(profit before tax/ Total revenues)*100%)
(Total sales + other income-discounted received) / Average total assets
Cost of goods sold / Average inventories
(VAT output + sales)/ Average account receivable
(Purchases - purchases return) / Average accounts payable
(Profit before tax/Average total assets) *100%
(Profit before tax + interest expense)/ (Total average assets)
(Profit before tax / Average owner's equity) *100%
Current assets / Current liabilities
( Curren assets - Inventory - Other current assets ) / Current Liabilities
Cash & Cash equivalents/ Current liabilities
Total liabilities / total assets
Long-term debt/ (Long- term debt + Total shareholder's equity)
Long-term debt / Total shareholder's equity
(Net cash flow from operations + payment for interest and income taxes)/ Cash payment for interest
N-1 N
12% 35.83%
2.01 1.46
7.88 3.38
10.10 13.44
7.00 6.56
20% 51.74%
22% 53.22%
38% 64.66%
2.02 3.60
1.51 1.67
0.55 0.78
0.45 0.20
0.20 0.10
0.22 0.11
11.90 35.91
Part B-1: You are required to prepare financial statements for Painting Shop, a partnership of Tom, Jerry
prepare for Painting Shop a Profit and Loss Account for the year ended 31 December 2023, and a Balanc

Tom, Jerry and Donald operate the Painting Shop sharing profits in the ratio 2:1:1, respectively. On Dece
of the Painting Shop as follows:

TOM, JERRY AND DONALD

TRIAL BALANCE AS AT 31 DECEMBER

£000
Dr
Capital:
Tom C
Jerry C
Donald C
Current account:
Tom C
Jerry 4,000 C
Donald C
Drawings:
Tom 3,000 D
Jerry 2,500 D
Donald 3,500 D
Purchases 80,000 R
Purchases returns R
Sales R
Discount received R
Leasehold premises, at cost 120,000 C
Office furniture, at cost 80,000 C
Accumulated depreciation (as at 1 January 2023)
Leasehold premises
Office furniture
Salaries 8,000 R
Advertising 2,000 R
Light&Heat 500 R
Inventory (as at 1 January 2023) 15,000 C
Sales returns 5,000 C
Insurance 3,000 R
Discount allowed 10,000 R
Trade Receivables 20,000 C
Cash in hand 25,500 C
Cash at bank 80,000 C
462,000
The following additional information as at 31 December 2023 is available:
1. Inventory at 31 December 2023 was valued at £20,000.
2. Partners are to receive 5% interest on their capital.
3. Interest on drawings is to be charged at 5%.
4. Jerry and Donald are to receive salaries of £3,000 each.
5. There was an amount of £5,500 outstanding for salaries at December 31, 2023.
6. £6,000 was due but unpaid for carriage outwards.
7. Insurance paid in advance amounted to £2,000.
8. The allowance of doubful debts is to be adjusted so that it is 2% of trade receivables.
9. Depreciation is to be charged as follows:
* Leasehold premises: 10% per annum using the straight line method.
* Office furniture: 10% per annum using the reducing balance method..
Required:
(1) Prepare Statement of Trading and Profit or Loss, Statement of Profit and Loss Appropriation Accou
year ended 31 December 2023
(2) Prepare Statement of financial position as at that date.

Guidances:
Step 1: Identify and insert against each balance C for capital items, R for revenue items, D for Drawings
Step 2: Use additional information from scenario to identify what adjustment should be made, then adju
Working 1: Inventory at 31 December 2023 was valued at £20,000.
* Closing inventory = £20,000 ; on balance sheet
* COGS = (Opening inventory + Purchases) - Closing inventory
* Equal = ( £15,000 + £80,000) - £20,000 = £75,000 will be reported on IS
Working 2: Partners are to receive 5% interest on their capital.
Tom = £70,000*5%= £3,500
Jerry = £20,000*5%= £1,000
Donald = £20,000*5%= £1,000
Working 3: Interest on drawings is to be charged at 5%.
Tom = £3,000*5% = £150
Jerry = £2,500*5% = £125
Donald = £3,500*5% = £175
Working 4: Jerry and Donald are to receive salaries of £3,000 each.
Jerry: £3,000
Donald: £3,000
Working 5: There was an amount of £5,500 outstanding for salaries at December 31, 2023
*Closing accruals = £5,500, on balance sheet, current liabilities (accruals)
Accured salaries expenses = (Amount of paid during the year + Closing accruals) - Opening accruals
Calculation results = ( £8,000 + £5,500) - 0 = £13,500; on Income Statement
Working 6: £6,000 was due but unpaid for carriage outwards.
* Closing accruals = £6,000; on balance sheet
Accrued carriage outwards expenses = (Amount of paid during year + Closing accruals) - Opening accru
Calculation results = (0 + £6,000) - 0 = £6,000
Working 7: Insurance paid in advance amounted to £2,000.
* Closing prepayment = £2,000 on the balance sheet
Insurance charged to Income Statement = (Opening Prepayment + Amount of insurance expenses paid d
Calculation results = (0+ £3,000) - £2,000 = £1,000 ; on Income Statement
Working 8: The allowance of doubful debts is to be adjusted so that it is 2% of trade receivables.
* Allowance required for the whole year: £2,000*2% = £400; reported on the balance sheet
* Increase in allowance charged to income statement = Allowance required - Opening allowance
* Calculation results = £400 - 0 = £400
Working 9: Depreciation is to be charged as follows:
* Leasehold premises: 10% per annum using the straight line method.
Opening Accumulated depreciation = £5,000
Depreciation charge for a year: 10%* £120,000 = £12,000
Closing accumulated depreciation : £5,000 + £12,000 = £17,000; reported on Balance Sheet, non-curre
* Office furniture: 10% per annum using the reducing balance method..
Opening Accumulated depreciation = £500
Depreciation charge for a year: 10%*( £80,000 - £500) = £7,950
Closing accumulated depreciation : £500 + £7,950 = £8,450
* Total depreciation charged to Income Statement : £17,000 + £8,450 = £25,450 on Income Statem
Step 3: Create the statements; and use the workings described in Step 2 and information from the trial ba

TOM, JERRY AND DONALD

STATEMENT OF TRADING, PROFIT OR LOSS FOR THE YE
£000
Sales
Sales return
Net sales
Less: Costs of goods sold
Opening inventory
Purchases 80,000
Purchases returns (5,000)
Closing inventory (20,000)
(75,000)

Gross Profit
Add discount received

Less: Expenses
Salaries
Advertising
Light & Heat
Insurance
Discount allowed
Carriage outwards
Doubtful debt
Depreciation
Leasehold premises
Office furniture
Net profit for the year

TOM, JERRY AND DONALD

STATEMENT OF PROFIT AND LOSS APPROPRIATION FOR TH
£000
Net profit
ADD:
Interest on Drawings:
Tom
Jerry
Donald

LESS:
Interest in Capital
Tom 3,500
Jerry 1,000
Donald 1,000
Salaries:
Jerry 3,000
Donald 3,000

Share of residual Profit/Loss

Tom (2/4)
Jerry (1/4)
Donald (1/4)

TOM, JERRY AND DONALD

STATEMENT OF PARTNER CAPITAL FOR THE YEAR
£000
Tom
Balance as at 31 December 2023 8,000
ADD:
Interest on Capital 3,500
Salary
Share of Profit/Loss 94,050
105,550
LESS:
Drawings (3,000)
Interest on Drawings (150)
Balances 102,400

TOM, JERRY AND DONALD

STATEMENT OF FINANCIAL POSITION AT 31

Non-current assets
Leasehold premises, at cost
Office furniture
..
..
Current assets
Inventory
Trade receivable
Allowance for doubtful debt
Prepaid Insurance
Cash in hand
Cash at bank
TOTAL ASSET

Current liabilities
Outstanding for salaries
Unpaid carriage outwards

Financed by
Non-current liabilities
Capital account
Tom
Jerry
Donald
Current account
Tom
Jerry
Donald
Total capital and liabilities
…
….
 a partnership of Tom, Jerry and Donald, from a trial balance, making appropriate adjustments, i.e.
ecember 2023, and a Balance Sheet as at that date.

2:1:1, respectively. On December 31, 2023 the following trial balance was extracted from the ledger

ERRY AND DONALD

E AS AT 31 DECEMBER 2023

£000
Cr

70,000
20,000
20,000

8,000

6,000

5,000
317,500
10,000

5,000
500

462,000
ceivables.

Loss Appropriation Account, and Statement of Current Account for the

enue items, D for Drawings

should be made, then adjust them.

ecember 31, 2023

uals) - Opening accruals

g accruals) - Opening accruals

f insurance expenses paid during the year) - closing prepayment

2% of trade receivables.
he balance sheet
Opening allowance

on Balance Sheet, non-current assets

£25,450 on Income Statement; operating expenses

nformation from the trial balance to complete (Referencing: Chapter 3 Part 3.)

ERRY AND DONALD

T OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2023
£000 £000
317,500
(5,000)
312,500

15,000

15,000
90,000 (70,000)
242,500
10,000
252,500

13,500
2,000
500
1,000
10,000
6,000
400 33,400
 12,000
7,950 (53,350)
199,150

ERRY AND DONALD

PROPRIATION FOR THE YEAR ENDED 31 DECEMBER 2023
£000 £000
199,150

150
125
175 450
199,600

5,500

6,000 (11,500)
188,100

94,050
47,025
47,025 188,100

ERRY AND DONALD

PITAL FOR THE YEAR ENDED 31 DECEMBER 2023
£000 £000
Jerry Donald
(4,000) 6,000

1,000 1,000
3,000 3,000
47,025 47,025
47,025 57,025

(2,500) (3,500)
 (125) (175)
44,400 53,350

ERRY AND DONALD

ANCIAL POSITION AT 31 DECEMBER 2023

£000 £000 £000

Cost Acc. Dep. Net book value (NBV)
120,000 (17,000) 103,000
80,000 (8,450) 71,550
200,000 (25,450) 174,550

20,000
20,000
(400) 19,600
2,000
25,500
80,000 147,100
321,650

5500
6000
11500

70,000
20,000
20,000 110,000

102,400
44,400
53,350 200,150 310,150
321,650
Part B-2: A range of comparative key performance ratios from the previous year.

Some key performance ratios from the previous year are listed as follows:

ROS
Assets turnover
Inventories turnover
Account receivable turnover
ROA
ROE
Referencing: Chapter 3 Part 3. Example: preparing financial Statement for a partners
parative key performance ratios from the previous year.

ios from the previous year are listed as follows:

Formula N-1 N
(Profit before tax / Total sales or revenues)*100% 42% 61.75%
Total sales / Average total assets 2.01 1.0
Cost of good sold/ Average inventories 20.00 4
(VAT output + Sales )/ Average accounts receivable 12.00 15.783
(Profit before tax/ Average total assets)*100% 40% 61.92%
(Profit after tax/ Average owner's equity)*100% 45% 64.21%
rt 3. Example: preparing financial Statement for a partnership
- Sales Return (Return Inwards; Return In) : Hàng bán trả lại. Hàng hóa doanh nghiệp bị trả lại bởi khách hàng
- Purchase Return (Return Outwards; Return Out) : Hàng mua trả lại. Hàng hóa doanh nghiệp trả lại nhà cung cấp

- Discount Received : Chiết khấu mua hàng . Chiết khấu mua hàng là trường hợp doanh nghiệp mua hàn

- Discount Allowed : Chiết khấu bán hàng. Chiết khấu bán hàng là trường hợp doanh nghiệp bán hàng h

- Carriage Inwards : Chi phí vận chuyện hàng vào. Chi phí vận chuyển hàng mua vào doanh nghiệp.

- Carriage Outwards : Chi phí vận chuyển hàng đi bán. Chi phí vận chuyển hàng đến với khách hàng của doanh ng
 bị trả lại bởi khách hàng
h nghiệp trả lại nhà cung cấp

hợp doanh nghiệp mua hàng được nhận sự giảm giá từ người bán

p doanh nghiệp bán hàng hóa hoặc dịch vụ giảm giá cho khách hàng

doanh nghiệp.

với khách hàng của doanh nghiệp