Part B-1: You are required to prepare financial statements for Painting Shop, a partnership of Tom, Jerry

making appropriate adjustments, i.e. prepare for Painting Shop a Profit and Loss Account for the year en
Balance Sheet as at that date.
Tom, Jerry and Donald operate the Painting Shop sharing profits in the ratio 2:1:1, respectively. On Dece
balance was extracted from the ledger of the Painting Shop as follows:

TOM, JERRY AND DONALD

TRIAL BALANCE AS AT 31 DECEMBER 2023

£000 £000
Dr Cr
Capital:
Tom 70,000
Jerry 20,000
Donald 20,000
Current account:
Tom 8,000
Jerry 4,000
Donald 6,000
Drawings:
Tom 3,000
Jerry 2,500
Donald 3,500
Purchases 80,000
Purchases returns 5,000
Sales 317,500
Discount received 10,000
Leasehold premises, at cost 120,000
Office furniture, at cost 80,000
Accumulated depreciation (as at 1 January 2023)
Leasehold premises 5,000
Office furniture 500
Salaries 8,000
Advertising 2,000
Light&Heat 500
Inventory (as at 1 January 2023) 15,000
Sales returns 5,000
Insurance 3,000
Discount allowed 10,000
Trade Receivables 20,000
Cash in hand 25,500
Cash at bank 80,000
462,000 462,000
The following additional information as at 31 December 2023 is available:
1. Inventory at 31 December 2023 was valued at £20,000.
Closing inventory = £20,000
COGS= (opening inventory + purchases) - closing inventory = (£15,000+ £80,000- £5,000)- £20,000)= £

2. Partners are to receive 5% interest on their capital.

Account for interest in capital
Tom = 5%* £70,000 = £3,500
Jerry = 5%* £20,000 = £1,000
Donald = 5%* £20,000 = £1,000
3. Interest on drawings is to be charged at 5%.
Account for interest on drawings
Tom = 5%* £3.000 = £150

Jerry = 5%* £2.500 = £125

Donald = 5%* £3,500 = £175
4. Jerry and Donald are to receive salaries of £3,000 each.
Partners' salaries:
Jerry =£3.000
Donald = £3.000

5. There was an amount of £5,500 outstanding for salaries at December 31, 2023.
Closing accruals = £5.500; BS, current liabilities (accruals)
Accrued salaries expenses = (Amounts of paid during the year + Closing accruals) - Opening accruals =
; IS, operating expenses ( carriage outwards)

6. £6,000 was due but unpaid for carriage outwards.

Closing accruals = £6.000; BS, current liabilities (accruals)

Accrued carriage outwards expenses= ( Amounts of paid during the year + Closing accruals) - Opening a

7. Insurance paid in advance amounted to £2,000.

Closing prepayment = £2.000; BS, current assets
Insurance charged to IS = (Opening Prepayment + Amounts of insurance expenses paid during the year)
Insurance charged to IS = (Opening Prepayment + Amounts of insurance expenses paid during the year)

8. The allowance of doubful debts is to be adjusted so that it is 2% of trade receivables.

Allowance required for the whole year = 2% * £20,000 = £400, reported on the BS right under Trade rec
Increase in allowance charged to profit and loss = Allowance required - Opening allowance = £400 - 0 =

9. Depreciation is to be charged as follows:

* Leasehold premises: 10% per annum using the straight line method.
Opening accumulated depreciation: £5.000
Depreciation charge for a year = 10% * historical cost = 10% * £120.000= £12.000
Closing accumulated depreciation = £5.000 + £12.000= £17.000; BS, non- current assets
* Office furniture: 10% per annum using the reducing balance method..
Opening accumulated depreciation: £500
Depreciation charge for a year = 10% * (historical cost - accumulated depreciation) = 10% * ( £80.000 -
Closing accumulated depreciation = £500 + £7.950= £8.450; BS, non- current assets
Total depreciation charged to Profit and Loss account = £17.000 +£8.450 = £25.450; IS, operating expen
Required:
(1) Prepare Statement of Trading and Profit or Loss, Statement of Profit and Loss Appropriation Accou
of Current Account for the year ended 31 December 2023
(2) Prepare Statement of financial position as at that date.

Guidances:
Step 1: Identify and insert against each balance C for capital items, R for revenue items, D for Drawings
Step 2: Use additional information from scenario to identify what adjustment should be made, then adju
Working 1: Inventory
Working 2: Interest in Capital
Working 3: Interest on Drawings
Working 4: Partners' salaries
Working 5: Accruals
Working 6: Accruals
Working 7: Prepayments
Working 8: Allowance for doubful debts
Working 9: Depreciation
Step 3: Create the statements; and use the workings described in Step 2 and information from the trial ba
(Referencing: Chapter 3 Part 3.)
TOM, JERRY AND DONALD
STATEMENT OF TRADING, PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2023
£000
Sales
Sales returns
NET SALES
Less : Cost of good sold
Opening inventory
Purchases
Purchases returns
Closing inventory
GROSS PROFIT
Add : Discount Received

Less Expenses :
Slaries
Advertising
Light&Heat
Insurance
Carriage Outwards
Discount allowed
Allowance of doubful debts
Depreciation :
Leasehold premises
Office furniture
Net profit for the year

TOM, JERRY AND DONALD

STATEMENT OF PROFIT AND LOSS
APPROPRIATION FOR THE YEAR ENDED 31
DECEMBER 2023
£000
Net profit
ADD:
Interest on Drawings:
Tom
Jerry
Donald

LESS:
Interest in Capital
Tom 3,500
Jerry 1,000
Donald 1,000
Salaries:
Jerry 3,000
Donald 3,000

Share of residual Profit/Loss

Tom (2/4)
Jerry (1/4)
Donald (1/4)

TOM, JERRY AND DONALD

STATEMENT OF PARTNER CAPITAL FOR
THE YEAR ENDED 31 DECEMBER 2023
£000
Tom
Balance as at 31 December 2023 8,000
ADD:
Interest on Capital 3,500
Salary
Share of Profit/Loss 95,800
107,300
LESS:
Drawings (3,000)
Interest on Drawings (150)
Balances 104,150

TOM, JERRY AND DONALD

STATEMENT OF FINANCIAL POSITION AT
31 DECEMBER 2023

£000
Non-current assets Cost
Leasehold premises 120,000
Office furniture 80,000
Current assets
Inventory
Trade Receivables
Less : Allowance for Doubtful Debts
Prepayment
Cash at bank
Cash in hand
Total assets
Current liabilities
Accrued salaries expenses
Accrued carriage outwards expenses

Capital account
Tom 70,000
Jerry 20,000
Donald 20,000
Current account
Tom 104,150
Jerry 42,275
Donald 51,225

Total capital and liabilities

partnership of Tom, Jerry and Donald, from a trial balance,
s Account for the year ended 31 December 2023, and a Part B-2: A range of comparati

1:1, respectively. On December 31, 2023 the following trial Some key performance ratios fro

ROS ( Returned of Sales )

ALD
EMBER 2023 Assets turnover

Inventories turnover

Account receivable turnover

ROA ( Return on Assets )

ROE ( Return on Equity )

000- £5,000)- £20,000)= £70,000, reported on Income Statement

Referencing: Chapter 3 Part 3. E

als) - Opening accruals = (£8,000 + £5.500) - 0= £13.500

sing accruals) - Opening accruals = ( 0 + £6.000)- 0= £6.000 ; IS ,operating expenses (carriage outwards).

ses paid during the year) - Closing prepayment

ses paid during the year) - Closing prepayment =(0+ £3.000 ) -£2.000 = £1.000; IS, operating expenses (insurance)

receivables.
BS right under Trade receivables
g allowance = £400 - 0 = £400, reported on the IS
ion) = 10% * ( £80.000 - £500) = £7.950

.450; IS, operating expenses (Depreciation)

oss Appropriation Account, and Statement

ue items, D for Drawings

hould be made, then adjust them.

ormation from the trial balance to complete

ALD

£000 £000
317,500
(5,000)
312,500

15,000
80,000
(5,000)
(20,000) (70,000)
242,500
10,000
252,500

8,000
2,000
500
 3,000
6000
10,000
400

12,000
7,950 (49,850)
202,650

ALD

£000 £000
202,650

150
125
175 450
203,100

5,500

6,000 (11,500)
191,600

95,800
47,900
47,900 191,600

ALD

£000 £000
Jerry Donald
(4,000) 6,000
 1,000 1,000

47,900 47,900
44,900 54,900

(2,500) (3,500)
(125) (175)
42,275 51,225

ALD

£000
Acc. Dep.
-17,000
-8,450

20,000
20,000
-400
1,000
80,000
25,500

5,500
6,000

110,000

242,150
: A range of comparative key performance ratios from the previous year.

y performance ratios from the previous year are listed as follows:

Fomula Previous year's valueCurrent year's value
eturned of Sales ) 42%

2.01

es turnover 20.00

receivable turnover 12.00

eturn on Assets ) 40%

eturn on Equity ) 45%

ing: Chapter 3 Part 3. Example: preparing financial Statement for a partnership

ge outwards).

g expenses (insurance)
- Sales Return (Return Inwards; Return In) : Hàng bán trả lại. Hàng hóa doanh nghiệp bị trả lại bởi khách hàng
- Purchase Return (Return Outwards; Return Out) : Hàng mua trả lại. Hàng hóa doanh nghiệp trả lại nhà cung cấp
- Discount Received : Chiết khấu mua hàng . Chiết khấu mua hàng là trường hợp doanh nghiệp mua hàn
- Discount Allowed : Chiết khấu bán hàng. Chiết khấu bán hàng là trường hợp doanh nghiệp bán hàng h
- Carriage Inwards : Chi phí vận chuyện hàng vào. Chi phí vận chuyển hàng mua vào doanh nghiệp.

- Carriage Outwards : Chi phí vận chuyển hàng đi bán. Chi phí vận chuyển hàng đến với khách hàng của doanh ng
p bị trả lại bởi khách hàng
nh nghiệp trả lại nhà cung cấp
hợp doanh nghiệp mua hàng được nhận sự giảm giá từ người bán
ợp doanh nghiệp bán hàng hóa hoặc dịch vụ giảm giá cho khách hàng
doanh nghiệp.

với khách hàng của doanh nghiệp

Part A-1: You are required to prepare financial statements for Adam Lee, a sole trader, from a trial balan
i.e. prepare for Adam Lee a Profit and Loss Account for the year ended 31 May 2023, and a Balance She

The following trial balance was extracted from the ledger of Adam Lee as 31 May 2023 - the end of this

ADAM LEE
TRIAL BALANCE AS AT 31 MAY 2023

£000 £000
Dr Cr
Land and building, at cost 200,000
Plant and machinery, at cost 100,000
Accumulated depreciation (as at 1 June 2019)
Land and buidling 45,000
Plant and machinery 30,000
Sales 496,900
Purchases 251,000
Inventory (as at 1 June 2019) 50,000
Discount received 4,800
Purchase returns 15,000
Wages and salaries 58,800
Loan interest 5,100
Other opearaing expenses 17,700
Trade paybles 36,000
Trade receivables 42,600
Cash in hand 300
Cash at bank 30,000
Drawings 24,000
Allowance for doubful debts at 1 June 2019 500
17% long-term loan 30,000
Capital, as at 1 June 2019 121,300
779,500 779,500

The following additional information as at 31 May 2023 is available:

1. Inventory at ar the close of business has been valued at cost at £75,000.
Closing inventory= £75.000, reported on Balance sheet as a current asset ( Inventory)
COGS= (opening inventory + purchases) - closing inventory = (£50.000+ £251.000- £15,000)- £75.000)

2. Wages and salaries need to be accrued by £2,800.

Accruals (related to Salaries expense) at 31 May 2023 = £2.800 : reported on Balance sheet (Accruals)
Accruals salaries charged to profit and loss for the year = ( Amounts of Salaries paid during the year + C

3. Other operating expenses are prepaid by £3,000

Closing prepayment (related to insurance expenses)= £3.000, reported on Balance sheet as an asset (Prep
Prepaid operating expense charged to the Income statement = (Opening prepayment + Amounts of Insura

4. A bad debt of £10,600 included in the trade receivables balance of £42,600 is to be written off.
Bad debt expense = £10.600: reported on the Income Statement (Bad debt written off)
Trade receivables balance at 31 May 2023 = £42.600 - £10.600 = £32.000: reported on the Balance sheet

5. The allowance of doubful debts is to be adjusted so that it is 2% of trade receivables.

Allowance required for the whole year: 2% * £42.600 = £852: reported on the Balance sheet right under
Increase in allowance charged to profit and loss = Allowance required - Opening allowance = £852 - £50
statement.
6. Depreciation of the year ended 31 May 2023 has still to be provided for as follows:
* Land and building: 1.5% per annum using the straight line method.
Depreciation for a year = 1.5% * the original cost= 1.5% * £ 200.000= £3.000
Depreciation expense of £3.000 will be charged to Income Statement
Accumulated depreciation at 31 May 2023 = Opening accumulated depreciation + Depreciation= £45.00
on Balance sheet right under Land and bulding at cost
* Plant and machinery: 25% per annum using the reducing balance method.
Depreciation for a year = 25% *( Historical cost - accrumulated depreciation of plant and machinery)= 2
Depreciation expense of £17.500 will be charged to Incom Statement
Accumulated depreciation at 31 May 2023 = Opening accumulated depreciation + Depreciation= £30.00
on Balance sheet right under Plant and machinery at cost

Required:
(1) Prepare Adam Lee's Statement of profit or loss and Statement of retained earnings for the year ended
(2) Prepare his statement of financial position as at that date.

Guidances:
Step 1: Identify and insert against each balance C for capital items, R for revenue items, D for Drawings
Step 2: Use additional information from scenario to identify what adjustment should be made, then adju
Working 1: Inventory
Working 2: Accruals
Working 3: Prepayments
Working 4: Bad debts
Working 5: Allowance for doubful debts
Working 6: Depreciation
Step 3: Create a format of Statement of profit or loss and Statement of financial position; and use the wo
and information from the trial balance to complete these statements. (Referencing the format exanple in

ADAM LEE
 STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MAY 2023

£000 £000
Sales 496,900
Less : Cost of good sold
Opening inventory 50,000
Purchases 251,000
Purchase returns (15,000)
Closing inventory -75,000 -211,000
Gross profit 285,900
Discounts received 4,800
290,700
Less : Expenses
Wages and salaries 58,800
Loan interest 5,100
Depreciation
Land and building 3,000
Plant and machinery 17,500
Bad debt expense 10,600
Allowance of doubtful debts 500
Prepaid operating expense 17,700 (113,200)
Net profit for the year 177,500

ADAM LEE
STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED 31 MAY 2023
LeA90:C90ss : Drawings
£000
Net profit for the year 177,500
Less : Drawings (24,000)
Retained Earnings 153,500

ADAM LEE
STATEMENT OF FINANCIAL POSITION AT 31 MAY 2023

£000 £000
Non-current assets Cost Accumulated depreciation
Land and building (Cost - Accumulated Depreciati 200,000 -48,000
Plan and machinery (Cost - Accumulated Depreciat 100,000 -47,500
Current assets
Inventory 50,000
Trade receivables net of allowance for Doubtful debts 32,000
Less : Allowance of doubtful debts -852
Prepayments 3,000
Cash in bank 30,000
Cash in hand 300
Total asset

Equity and Liabilities

Opening capital 121,300
Net profit for the year 177,500
Drawings (24,000)
Closing capital
Non-current liabilities
Loan
Current liabilities
Trade payables 36,000
Accruals 2,800
Total equity and liabilities
sole trader, from a trial balance, making appropriate adjustments,
May 2023, and a Balance Sheet as at that date.

31 May 2023 - the end of this financial year.

Inventory)
251.000- £15,000)- £75.000)= £211.000, reported on Income Statement

on Balance sheet (Accruals)

aries paid during the year + Closing accruals) - Opening accruals = (£58.800 + £2.800) - 0= £61.600, reported on In
alance sheet as an asset (Prepayment)
payment + Amounts of Insurance expenses paid during the year) - Closing prepayment = (0 + £17.700) - £3.000 =

2,600 is to be written off.

written off)
reported on the Balance sheet (Trade receivables)

ade receivables.
the Balance sheet right under Trade receivables.
ening allowance = £852 - £500 = £352 reported on the Income

for as follows: Referencing Example

ation + Depreciation= £45.000 + £3.000= £48.000, which is reported

alance method.
n of plant and machinery)= 25% * (£ 100.000- £ 30.000)= £17.500

ation + Depreciation= £30.000 + £17.500= £47.500, which is reported

d earnings for the year ended 31 May 2023

evenue items, D for Drawings

nt should be made, then adjust them.

ncial position; and use the workings described in Step 2,

rencing the format exanple included in this file)
DED 31 MAY 2023

ENDED 31 MAY 2023

MAY 2023

£000
ated depreciation NBV
152,000
52,500
114,448
318,948

274,800

30,000

38,800
343,600
 Part A-2: A range of comparative key performance ratios from the previous year.

Some key performance ratios from the previous year are listed as follows:
Fomula
ROS ( Returned of Sales ) Profit before tax * 100%
Total sales and revenues
Assets turnover

Inventories turnover

Account receivable turnover

Account payable turnover

ROA ( Return on Assets )

RE ( Return on Assets Variation )

ROE ( Return on Equity )

Current ratio

Quick ratio

Cash ratio

Debt ratio

Long-term debt to long-term capital ratio

Long-term debt to shareholder’s equity ratio

ICR ( Interest coverage ratio )

£61.600, reported on Income Statement (salary expenses)

+ £17.700) - £3.000 = £14.700

Referencing Example (Chapter 2 Part 3)

e previous year.

Previous year's valu Current year's value

12%

2.01

7.88

10.10

7.00

20%

22%

38%

2.02

1.51

0.55

0.45

0.20

0.22

11.90
- Sales Return (Return Inwards; Retu
- Purchase Return (Return Outwards
- Discount Received : Chiết khấu
- Discount Allowed : Chiết khấu b
- Carriage Inwards : Chi phí vận chuy
- Carriage Outwards : Chi phí vận ch
 urn (Return Inwards; Return In) : Hàng bán trả lại. Hàng hóa doanh nghiệp bị trả lại bởi khách hàng
e Return (Return Outwards; Return Out) : Hàng mua trả lại. Hàng hóa doanh nghiệp trả lại nhà cung cấp
t Received : Chiết khấu mua hàng . Chiết khấu mua hàng là trường hợp doanh nghiệp mua hàng được nhận sự gi
t Allowed : Chiết khấu bán hàng. Chiết khấu bán hàng là trường hợp doanh nghiệp bán hàng hóa hoặc dịch vụ gi
Inwards : Chi phí vận chuyện hàng vào. Chi phí vận chuyển hàng mua vào doanh nghiệp.
Outwards : Chi phí vận chuyển hàng đi bán. Chi phí vận chuyển hàng đến với khách hàng của doanh nghiệp
mua hàng được nhận sự giảm giá từ người bán
n hàng hóa hoặc dịch vụ giảm giá cho khách hàng

doanh nghiệp