Accounting for Flanagan's Fashion Store: Financial Statement Analysis

This assignment solution provides a comprehensive analysis of accounting principles applied to Flanagan's Fashion Store. It includes detailed journal entries addressing various transactions such as equipment purchases, depreciation, drawings, and adjustments for prepaid insurance, light and heat expenses, and bad debts. The solution presents an adjusted trial balance, equipment and building accounts, depreciation accounts, and inventory accounts. Furthermore, it culminates in the creation of a profit and loss statement and a balance sheet for the year ending October 31, 2018, offering insights into the store's financial performance and position. The solution also includes references to online resources used for the completion of the assignment.

ACCOUNTING

Table of Contents
MAIN BODY...................................................................................................................................1
B) Journal entries required to deal with additional information ............................................1
c) Statement of profit and loss and statement of balance sheet for Flanagan’s fashion store for
the year ended 31 October 2018.............................................................................................4
REFERENCES................................................................................................................................6

MAIN BODY
B) Journal entries required to deal with additional information
Journal entries
Particular Dr Cr
Cash A/c dr 23000
To equipment a/c 23000
Depreciation expense A/c Dr 104250
To accumulated depreciation equipment A/c 104250
Depreciation expense A/c Dr 17000
To Accumulated depreciation on building 17000
Drawing A/c Dr 18000
To inventory A/c 18000
prepaid insurance A/c Dr 12000
To insurance expense A/c 12000
Light and heat expense A/c Dr 16000
To light and heat payable A/c 16000
bad debts expense A/c Dr 12000
1

To allowance for bad debts A/c 8000
To Account receivable A/c 4000
Incorrect entry
purchase A/c Dr 26000
To receivable A/c 26000
correct entry
purchase A/c Dr 26000
To supplier A/c 26000
2

Working notes
Cost of equipment 440000
Total cost 440000
Less : selling price 23000
Value 417000
depreciation @ 25% 104250
working Notes for building
cost of building 840000
Less: land 280000
Cost 560000
Add : Accumulated depreciation 120000
Total cost 680000
Depreciation @2.5% 17000
Adjusted Trial balance as at 31st October 2018
Particular Debit (£) Credit (£)
6 % bank loan 600000
Accumulated depreciation Building) 17000
Allowance for receivable 2000
Accumulated depreciation (equipment) 104250
COGS 110000
Bank 136000
Bank loan interest paid 18000
3

Building – cost 560000
Capital 256000
carriage inwards 44000
Carriage outwards 31000
Cash 25000
Discounts allowed 19000
Discounts received 36000
Drawings 38000
equipment cost 440000
General expenses 28000
Insurance 102000
inventory 135000
Light and heat 80000
Payable 114000
Purchases 840000
Receivables 106000
Returns inwards 36000
Returns outwards 95000
Sales 1500000
Wages 166000
2860250 2860250
Equipment A/c
Particular Amount Particular Amount
To balance b/d 120000 By depreciation 104250
To profit on sale 7250 By cash 23000
127250 127250
Drawing A/c
4

Particular Amount Particular Amount
To inventory 18000 By balance b/d 56000
To balance c/d 38000
Building A/c
Particular Amount Particular Amount
To balance b/d 840000 By depreciation 17000
by balance c/d 823000
840000 840000
Depreciation A/c
To accumulated depreciation on
equipment 104250
To accumulated depreciation on
building 17000 By balance cld 121250
Accumulated depreciation A/c ( building )
Particular Amount Particular Amount
By balance b/d 120000
To balance c/d 137000
by depreciation
expense 17000
Accumulated depreciation A/c ( equipment )
By balance b/d 190000
To balance c/d 294250 By depreciation 104250
Inventory A/c
Particular Amount Particular Amount
5

To balance b/d 240000 By COGS 110000
by balance c/d 130000
c) Statement of profit and loss and statement of balance sheet for Flanagan’s fashion store for the
year ended 31 October 2018
Profit and loss A/c
Particular Amount amount
Sales 1500000
less: COGS 950000
Gross profit 550000
Allowance for receivables 2000
discount received 36000
Operating expenses
depreciation total 121250
general expenses 28000
light and heat 80000
interest paid 18000
carriage inward 44000
carriage outwards 31000
discount allowed 19000
insurance 102000
wages 166000
total expenses 609250
total incomes 588000
Net loss -21250
(Source : Trading and Profit and Loss Account, 2018)
6

working notes
opening stock 240000
purchase 840000
closing stock 130000
COGS 950000
Statement of balance sheet as on 31 st October 2018
Particular Amount Total
Non- Current Assets :
Building 560000
Less : depreciation 17000
543000
Current Assets :
Inventory 135000
Receivables 106000
bank 136000
cash 25000
402000
total assets 945000
Non- Current liabilities
Bank loan 600000
Current liabilities
payable 114000
Accrued expenses 16000
other 18250
Total liabilities 748250
Net 196750
7