Question Mr. Lukwesa has been running a retail business for some years. Below is

Question

Question Mr. Lukwesa has been running a retail business for some years. Below is the Statement of Financial Position, prepared by his book keeper prior to additional information being supplied by a professional accountant that Mr. Lukwesa hired. st ina Non Current Assets Freehold premises Motor vehicles 9 600 10 400 20 000 Current Assets Inventory Receivables Bank: Current a/c 13 000 9 400 800 3 200 Fixed deposit a/c Cash in hand 26 572 Current Liabilities Payables Accruals 11 000 728 11728 Working capital Financed by: Capital Net profit 31920 7 400 39 320 (4 600) Drawings Suspense a/c

Explanation / Answer

1.

Cash a/c 100

To IOU Issued 100

( Cash is required to be reduced by 100 as it actually is a debt which is wrongly included in cash.)

2. Bank a/c 124

To Suspense a/c 124

(Cheques of 124 were unpresented are required to be considered)

3. Interest receivable a/c 100

TO Statement of Profit & Loss a/c 100

(Interest received but not received in cash )

4. Statement of Profit & loss 60

To Sales 60

5. Sales a/c 164

To Statement of Profit & loss 164

6. Doubtful debt a/c 360

To Receivables a/c 360

Bad debt a/c 144

To Doubtful debt a/c 144

Statement of profit & loss 144

To Bad debt 144

7. Statement of profit & loss 966

To Inventory 966   

8.Statement of profit & loss    1040

To   Depriciation a/c 1040

9. Statement of Profit & loss 96

To Insurance Premium 96   

Statement for showing adjustments to Net profit

Net Profit 7400

Add: Interest receivable 100

Less: Sales (60)

Add: Sales 164

Less: bad debt (144)

Add: inventory 966

Less: Depriciation (1040)

Less: Insurance Premium (96)

Total 7290

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