Although Deborah Adefowope has run a small business for many years, she has never kept adequate accounting records. However, a need to obtain a bank loan for the expansion of the business has necessitated the preparation of ‘final’ accounts for the year ended 31 August 2009. As a result, the following information has been obtained after much careful research: Deborah Adefowope’s business assets and liabilities are as follows: As at 1/09/08 31/08/09 Stock in trade GHS8,600 GHS16,800 Debtors for sales 3,900 4,300 Creditors for purchases 7,400 8,900 Rent prepaid 300 420 Electricity accrued due 210 160 Balance at bank 2,300 1,650 Cash in hand 360 330 All takings have been banked after deducting the following payments: Cash drawings – Deborah Adefowope has not kept a record of cash drawings, but suggests these will be in the region of GHS8,000 Casual labour 1,200 Purchase of goods for resale 1,800 Note: takings have been the source of all amounts banked. Bank payments during the year ended 31 August 2009 have been summarised as follows: GHS Purchases 101,500 Rent 5,040 Electricity 1,390 Delivery costs (to customers) 3,000 Casual labour 6,620 It has been established that a gross profit of 331/3% on cost has been obtained on all the goods sold. Despite her apparent lack of practice accounting records, Deborah is able to confirm that she has taken out of the business during the year under review goods for her own use costing GHS600. Required: Prepare a computation of total purchases for the year ended 31 August, 2009 Prepare an income statement for the year ended 31 August 2009 and a statement of financial position as at that date
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Although Deborah Adefowope has run a small business for many years, she has never kept adequate accounting records. However, a need to obtain a bank loan for the expansion of the business has necessitated the preparation of ‘
Deborah Adefowope’s business assets and liabilities are as follows:
|
As at |
1/09/08 |
31/08/09 |
|
Stock in trade |
GHS8,600 |
GHS16,800 |
|
Debtors for sales |
3,900 |
4,300 |
|
Creditors for purchases |
7,400 |
8,900 |
|
Rent prepaid |
300 |
420 |
|
Electricity accrued due |
210 |
160 |
|
Balance at bank |
2,300 |
1,650 |
|
Cash in hand |
360 |
330 |
All takings have been banked after deducting the following payments: Cash drawings – Deborah Adefowope has not kept a record of cash drawings, but suggests these will be in the region of GHS8,000
|
Casual labour |
1,200 |
|
Purchase of goods for resale |
1,800 |
Note: takings have been the source of all amounts banked.
Bank payments during the year ended 31 August 2009 have been summarised as follows: GHS
|
Purchases |
101,500 |
|
Rent |
5,040 |
|
Electricity |
1,390 |
|
Delivery costs (to customers) |
3,000 |
|
Casual labour |
6,620 |
It has been established that a gross profit of 331/3% on cost has been obtained on all the goods sold.
Despite her apparent lack of practice accounting records, Deborah is able to confirm that she has taken out of the business during the year under review goods for her own use costing GHS600.
Required:
- Prepare a computation of total purchases for the year ended 31 August, 2009
- Prepare an income statement for the year ended 31 August 2009 and a
statement of financial position as at that date
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