The following Trial Balance was taken from the ledger of F. Jackline, a sole trader, on 31st December 2002
Kshs
Kshs
Capital
40,000
Purchases
26,154
Sales
36,246
Salaries
4,814
Stock
4,307
Insurance
820
Rent
965
Buildings
25,000
Furniture
14,500
Debtors
6,140
Other expenses
1,060
Creditors
4,638
Commission
_____
__946
82,795
82,795
Adjustments:
Salaries due at the end of year 2012 was Kshs 350
Insurance was paid for one year up to 31st March 2013.
Rent received for January 2013, Kshs 165
Commission accrued but not yet received, Kshs 120
Furniture to be depreciated by 10%.
5% of debtors are doubtful.
Stock on 31st December 2012 was valued at Kshs 5,008.
Required:
i) Income statement for the year ended 31st December 2002
ii) Statement of financial position as at 31st December 2002
With data so spread out, it is essentially impossible to evaluate.
To prepare the income statement and statement of financial position, you need to make adjustments based on the given information and calculate various figures.
i) Income statement for the year ended 31st December 2002:
1. Start with the Trial Balance:
- Sales: Kshs 36,246
- Purchases: Kshs 26,154
- Salaries: Kshs 4,814
- Other expenses: Kshs 1,060
- Commission: Kshs 946
2. Add the adjustments:
- Salaries due at the end of the year: Kshs 350
- Commission accrued: Kshs 120
3. Calculate the Gross Profit:
Gross Profit = Sales - Purchases
Gross Profit = 36,246 - 26,154
4. Calculate the Net Profit:
Net Profit = Gross Profit - Salaries - Other expenses - Commission - Salaries due
Net Profit = Gross Profit - 4,814 - 1,060 - 946 - 350
ii) Statement of financial position as at 31st December 2002:
1. Start with the Trial Balance:
- Capital: Kshs 40,000
- Stock: Kshs 4,307
- Buildings: Kshs 25,000
- Furniture: Kshs 14,500
- Debtors: Kshs 6,140
- Creditors: Kshs 4,638
2. Add the adjustments:
- Insurance prepaid for 3 months (January to March 2013)
- Rent received for January 2013
- Furniture depreciation by 10%
- 5% of debtors are doubtful
- Stock on 31st December 2012: Kshs 5,008
3. Calculate the Total Assets:
Total Assets = Stock + Buildings + Furniture + Debtors + Adjustments
4. Calculate the Total Liabilities:
Total Liabilities = Creditors
5. Calculate the Capital:
Capital = Total Assets - Total Liabilities
Once you have the above figures, you can prepare the income statement and statement of financial position using the format required by your accounting principles or guidelines.