Jean Smith, who retails wooden ornaments, has been so busy since she commenced business on 1 April 2019 that she has neglected to keep adequate accounting records. Jean’s opening capital consisted of her life savings of £15,000 which she used to open a business bank account. The transactions in this bank account during the year ended 31 March 2020 have been summarized from the bank account as follows: Receipts: £ Loan from John Peacock, uncle 10,000
Jean Smith, who retails wooden ornaments, has been so busy since she commenced business on 1 April 2019 that she has neglected to keep adequate accounting records. Jean’s opening capital consisted of her life savings of £15,000 which she used to open a business bank account. The transactions in this bank account during the year ended 31 March 2020 have been summarized from the bank account as follows:
Receipts: £
Loan from John Peacock, uncle 10,000
Takings 42,000
Payments:
Purchases of goods for resale 26,400
Electricity for period to 31 December 2019 760
Rent of premises for 15 months to 30 June 2020 3,500
Rates of premises for the year ended 31 March 2020 1,200
Wages of assistants 14,700
Purchase of van, 1 October 2019 7,600
Purchase of holiday caravan for Jean Smith’s private use 8,500
Van license and insurance, payments covering a year 250
According to the bank account, the balance in hand on 31 March 2020 was £4,090 in Jean Smith’s favour.
While the intention was to bank all takings intact, it now transpires that, in addition to cash drawings, the following payments were made out of takings before bankings:
£
Van running expenses 890
Postages, stationery and other sundry expenses 355
On 31 March 2020, takings of £640 awaited banking; this was done on 1 April 2020. It has been discovered that amounts paid into the bank of £340 on 29 March 2020 were not credited to Jean’s bank account until 2 April 2020 and a cheque of £120, drawn on 28 March 2020 for purchases, was not paid until 10 April 2020. The normal rate of gross profit on the goods sold by Jean Smith is 50% on sales. However, during the year a purchase of ornamental goldfish costing £600 proved to be unpopular with customers and therefore the entire stock bought had to be sold at cost price. Interest at the rate of 5% per annum is payable on each anniversary of the loan from John Peacock on January 2020.
The stock of goods for resale at 31 March 2020 has been valued at cost at £1,900. Creditors for purchases at 31 March 2020 amounted to £880 and electricity charges accrued due at that date were £180. Trade debtors at 31 March 2020 totaled £2,300.
Required:
Prepare the income statement the year ended 31 March 2020 and the balance sheet as at that date.
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