Introduction to Financial Accounting: Income Statement, Statement of Change in Equity, and Balance Sheet

INTRODUCTION TO
FINANCIAL ACCOUNTING

TABLE OF CONTENTS
Question 1........................................................................................................................................3
(a) Preparation of Income Statement and comprehension income statement.............................3
(b) Preparation of statement of change in equity........................................................................4
(c) Preparation of Orb's balance sheet at 31st December 2020...................................................5
Question 2........................................................................................................................................6
Question 3........................................................................................................................................8

Question 1
(a) Preparation of Income Statement and comprehension income statement
Orb's Income Statement (including comprehension income)
For the year ended 31st December 2020
Particulars Details 000 Amount (£) 000
Sales Revenue 5400
Less Cost of sale:
Opening inventory 730
Add Purchase 2950
Add Depreciation on building (note 2) 78
Add depreciation on plant and equipment (note
2)
190
Less Closing inventory 0 -3948
Add recoverable amount Loss of Stock 570
Gross Profit 2022
Operating Income
Allowances for impairment receivables 50
Operating Expenses
Administrative expenses (Note 1) 620
Distribution cost (Note 3) 400
Unrecoverable amount on loss of stock (900 -
570)
330
Research and development (note 4) 120 1470
Net profit before interest and expenses 602
Less Interest expenses -120