Given below are the balances taken from Amber’s ledger accounts on 31st December 2017. £ Fittings 10,950 Accumulated depreciation – fittings at 01/01/2017 3,750 Buildings 45,000 Accumulated depreciation – buildings at 01/01/2017 9,000 Inventory at 01/01/2017 22,500 Trade receivables 15,000 Allowance for doubtful debts 01/01/2017 1,200 Cash in hand 75 Cash at bank 1,875 Trade payables 27,000 Capital 28,575 Drawings 7,125 Purchases 120,000 Revenue 180,000 Wages 18,000 Advertising 300 Rates 6,000 Bank charges 2,700 The following information is also available: i. The value of inventory as at 31st December 2017 was £31,500 ii. Fittings are to be depreciated at 12% on reducing balance basis and buildings have a 40-year life and depreciated at cost. iii. Of the rates payments, £540 is for the next accounting period iv. Amber has just been notified that a debt of £850 is irrecoverable. As the economy is in recession it is expected that debtors may struggle to pay so an additional allowance of 5% is required against the remaining receivables. v. Amber has just taken £450 from the bank for her personal use. Required: d) Complete the Journal entries required to reflect the above additional information e) Draw up an updated Trial balance f) Complete the financial statements: Statement of Profit or Loss and Statement of Financial position, for Amber for the year ending 31st December 2017
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Given below are the balances taken from Amber’s ledger accounts on 31st December 2017.
£ Fittings 10,950
i. The value of inventory as at 31st December 2017 was £31,500 ii. Fittings are to be
Required:
d) Complete the
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