Comprehensive Financial Accounting Assignment: Solutions Provided

This document presents a solved financial accounting assignment, beginning with answers to multiple-choice questions covering fundamental accounting concepts. It then provides a detailed solution to a comprehensive problem involving the preparation of an income statement and balance sheet. The solution includes meticulous working notes that explain the treatment of various items such as suspense account balances, energy expenses, rent payments, depreciation on motor vehicles and computer equipment, debenture interest, and trade receivables. The income statement calculates gross profit, total income, pre-tax profit, post-tax profit, and retained earnings. The balance sheet categorizes assets into non-current and current, and liabilities into non-current and current, ultimately balancing equity and liabilities with total assets. This assignment solution is designed to aid students in understanding and applying financial accounting principles.

FINANCIAL ACCOUNTING

1. Option (a)
2. Option (b) and (c) both are correct due to being similar
3. Option (c)
4. Option (a)
5. Option (c)
6. Option (b)
7. Option (b)
8. Option (a)
9. Option (b)
10. Option (b)
11. Option (d)
12. Option (c)
13. Option (a)
14. Option (a)
15. Option (a)
16. Option (b)
17. Option (a)
18. Option (d)
19. Option (c)
20. Option (a)
21. Option (b)
22. Option (b)
23. Option (a)

24. Option (b)
25. Option (d)
26. Option (a)
27. Option (a)
28. Option (d)
29. Option (a)
30. Option (b)
31. Option (b)
32. Option (a)
33. Option (d)
34. Option (c)
35. Option (c)
Question 36
Particulars Amount
Revenue from Sales 2465000
Less: Cost of Sales
Opening Stock as at 1st December 2021 367000
+ Purchases 1245000
- Closing Stock as at 30th November (375000) (1237000)
Gross Profit 1228000
+ Other Operating Income 25000
Total Income 1253000
- Expenses
Administrative expenses 198000
+ Salaries (80% of 412000) 329600
+ depreciation - computer equipment 63900
+ Energy expenses 11923
+ Rent (25500 - 2833) 22667
Total administrative expenses 626090
Distribution expenses 75000
+ Salaries (20% * 412000) 82400

+ depreciation - motor vehicle 23800
+ Energy expenses 5110
Total Distribution expenses 186310
Other expenses
Marketing expenses 298200
Audit fee 8000
Debenture interest 3800
Allowance made for trade receivables 11475
Total expenses (1133875)
Pre - tax profit 119125
- Corporation tax (27800)
Post tax profit 91325
- Interim dividend paid (13000)
Profit for the year 78325
Retained earnings as at 1st December 2020 210800
Retained earnings as at 30th November 2021 289125
Working Notes:
1. Treatment of suspense account balance to write off it from trial balance, journal entry that
would be passed is as follows:
Computer equipment a/c 21000
To Suspense a/c 21000
Cost of Computer equipment less Accumulated depreciation = 405000 – 230000 = 175000
Depreciation to be charged on 30th November 2021 for the whole year = 405000 * 15% = 60750
Further equipment bought on 1st July 2021 = 21000
Depreciation to be charged on equipment bought later during the year = 21000 * 15% = 3150
Depreciation charged on equipment = 3150 + 60750 = 63900
2. Treatment of energy expenses
Energy expense = 15300 (Given)
Expected invoice amount to be paid for upcoming three months = 5200
Relevant for the current accounting year = 5200 / 3 = 1733

Total energy cost for the year = 15300 + O/s amount = 15300 + 1733 = 17033
Allocated of energy cost to administrative expenses = 17033 * 70% = 11923
Allocated of energy cost to Distribution expenses = 17033 * 30% = 5110
3. Treatment of Rent
Payment of rent made during the year = 25500
Paid on 1st July 2021 = 17000
Relevant to this accounting year ended at 30Th November 2021 = 17000 / 6 * 5 = 14167
Rent paid in advance = 17000 – 14167 = 2833
3. Charging depreciation on motor vehicle
Given,
Motor vehicle at cost = 265000
Accumulated depreciation on motor vehicle = 146000
Value of motor vehicle = 265000 – 146000 = 119000
Depreciation to be charged on motor vehicle at 30th November 2021 for the whole year
= 119000 * 20% = 23800
4. Interest to be charged on Debenture
= 76000 * 5% = 3800
5. Treatment of Trade receivables
Trade receivables = 388000 (Given)
Allowance made for receivables = 13000
Writing off Accounts receivables = 5500
Thus, remaining trade receivables = 388000 – 5500 = 382500
Remaining Balance of provision made for trade receivables = 13000 – 5500 = 7500

Further Allowance for irrecoverable trade receivables @3% can be made as,
Additional allowance made for irrecoverable amount of trade receivables can be made @3% as,
382500 * 3% = 11475
Allowance made for trade receivables = 7500 + 11475 = 18975
Balance Sheet as at 30th November 2021
Particulars Amount
Non – current assets
Computer equipment 426000
Motor Vehicles 265000
Non-current investments 26000
Current assets
Inventory 375000
Prepaid rent 2833
Receivables 382500
Cash and cash equivalents 250200
Total assets 1727533
Non – current liabilities
5% Debentures 76000
Current liabilities
Debenture interest 3800
Payables 252400
Allowance for trade receivables 18975
O/s energy expenses 1733
Accumulated depreciation - computer
equipment = (63900 + 230000)
293900
Accumulated depreciation on motor vehicles
= (146000 + 23800)
169800
Corporation tax liability 27800
O/s audit fee 8000
Equity
Ordinary £1 shares 560000
Share Premium 26000
Retained earnings 289125
Total equity & liabilities 1727533