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Here is an example of drawing up the final accounts from the single entry records. The only details we have are the following for the year ended 31 December 20X2.

  1. Customers to whom goods were sold paid $10,880 by cheque and $5,170 by cash.
  2. Paid suppliers of goods $8,200 by cheque and $3,500 by cash.
  3. Paid expenses by cheque: telephone charges $230, rent $300 and electricity 120
  4. Paid expenses by cash: printing $150, stationery $80 and general expenses $100
  5. The proprietor took $30 per week for personal use.
  6. The only fixed asset is a set of office furniture valued at $600.
  7. There’s no record of sales or purchases
At 31 Dec 20X1 At 31 Dec 20X2
$ $
Bank balance 2,120 4,150
Cash balance 630 410
Trade debtors 1,100 2,700
Trade creditors 850 1,120
Stock 1,980 2,350
Electricity 120 140

Statement of affairs as at 31 December 20X1

$ $
Fixed assets
Office furniture 600
Current assets
Stock 1,980
Debtors 1,100
Bank 2,120
Cash 630

5,830

Less: Current Liabilities
Creditors 850
Accruals 120

970 4,860


5,460

Financed by:
Capital 5,460

5,460

 

Summary of cash and bank receipts and payments

Particulars Cash Bank Particulars Cash Bank
$ $ $ $
Balance at 1.1.20X2 630 2,120 Suppliers 3,500 8,200
Received from debtors 5,170 10,880 Telephone - 230
Rent - 300
Electricity - 120
Printing 150 -
Stationery 80 -
General expenses 100 -
Drawings 1,560 -
Balance c/d 410 4,150
5,800 13,000 5,800 13,000


Calculation of purchases

The calculation of purchases for the accounting period is done by finding out how much purchases have been made regardless of whether they have been paid or not in the period. This can be known by finding the total payments made to suppliers of the goods less those goods purchased in the previous year and remain unpaid. The resultant amount when added to the goods still not paid will give the total purchase figure for the period as follow:

$
Cheque payments made to suppliers in the year 8,200
Cash payments made to suppliers in the year 3,500

11,700
Less: Payments made for goods purchased in previous year 850

10,850
Add: Purchases made this year but not yet paid 1,120
Total goods bought this year
11,970

Total Creditors

$ $
Cheques paid to suppliers 8,200 Balance b/d 850
Cash paid to suppliers 3,500 Purchases* 11,970
Balance c/d 1,120
12,820 12,820

* Balancing figure


Calculation of sales

The calculation of sales can only be done by producing a debtors account. By knowing how much of the sales remain unpaid at the beginning and the end of the financial year and the total receipts from the debtors, sales for the period can be determined.


Cheque payments received from debtors in the year 10,880
Cash payments received from debtors in the year 5,170

16,050
Less: Payments received for goods sold in previous year 1,100

14,950
Add: Goods sold this year but not yet been paid 2,700
Total goods sold this year
17,650

Total Debtors

$ $
Balance b/d
1,100 Cheques received 10,880
Sales**
17,650 Cash received 5,170

Balance c/d 2,700
18,750 18,750

** Balancing figure


Expense account

The reason that the electricity account and not any other account is constructed is due to its accrual at the end of the last accounting period and brought forward to the current period. Where there are accruals or prepayments, an account is created for that particular expense item. Having entered the known amounts in the account, the unknown one is the balancing figure, and this is the amount that has to be charged to the profit and loss account for the period.

When there are no accruals or prepayments, no account is needed to be prepared. This is because expenses paid in the period are those incurred in the same period. They just need to be charged to the profit and loss account.


Electricity Account

$ $
Bank
120 Balance c/d 120
Balance c/d
140 Electricity expense*** 140
260 260

*** Balancing figure

Now that the missing figures such as for sales and purchases are discovered, the final accounts for the year 20X2 can be drawn up.

Trading and profit and loss account for the year ended 31 December 20X2

$
Sales 17,650
Less: Cost of goods sold:
Opening stock 1,980
Add: Purchases 11,970

13,950
Less: Closing stock 2,350 11,600
Gross profit

6,050
Less: Expenses:
Telephone 230
Rent 300
Electricity 140
Printing 150
Stationery 80
General expenses 100
Depreciation 60 1,060
Net profit

4,990

Balance Sheet as at 31 December 20X2

$ $ $
Fixed assets
Office furniture 600
Less: Depreciation 60 540

Current assets:
Stock 2,350
Debtors 2,700
Bank 4,150
Cash 410

9,610
Less: Current liabilities:
Creditors 1,120
Accrual: Electricity 140 1,260 8,350



8,890

Financed by:
Capital: Balance at 1.1.20X2 5,460
Add: Net profit 4,990

10,450
Less: Drawings 1,560

8.890





Last Updated (Saturday, 04 September 2010 01:18)