Prepare the statement of comprehensive income of royal tradersfor the year ended 28 Feb 2021. INFORMATION The trial balance, adjustments and additional information given below were extracted from the accounting records of Royal Traders on 28 February 2021, the end of the financial year. ROYAL TRADERS PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2021 Debit (R) Credit (R) Balance sheet accounts section Capital 301 000 Drawings 134 720 Vehicles at cost 360 000 Equipment at cost 240 000 Accumulated depreciation on vehicles 186 000 Accumulated depreciation on equipment 62 000 Trading inventory 140 000 Debtors control 62 000 Provision for bad debts 8 000 Bank 42 800 Cash float 1 000 Creditors control 82 800 Mortgage loan: Leo Bank (18% p.a.) 160 000 Nominal accounts section Sales 1 000 000 Cost of sales 480 000 Sales returns 8 000 Salaries and wages 178 000 Bad debts 2 000 Stationery 4 000 Rent expense 42 880 Motor expenses 34 000 Bad debts recovered 2 000 Telephone 14 000 Electricity and water 24 000 Bank charges 6 000 Insurance 12 000 Interest on mortgage loan 26 400 Commission income 10 000 1 811 800 1 811 800 Adjustments and additional information According to the physical stocktaking completed on 28 February 2021, the following inventories were on hand: 1.1 Trading inventory, R136 000 1.2 Stationery, R600. An account received from Airtel Fitters on 28 February 2021 for the installation of an air conditioning unit in one of the vehicles was debited to the motor expenses account in error, R6 000. No entry has been made for interest at 12% p.a. that was charged for two months on the overdue account of a debtor who owed R6 000. An electronic funds transfer for R1 330 was made to Royal Traders on 28 February 2021 from a debtor, after a settlement discount of 5% was deducted. No entries have been made for this transaction. The provision for bad debts must be decreased to R3 000. The telephone account for February 2021 was due to be paid on 02 March 2021, R1 400. Rent expense has been paid up to 31 March 2021.Note:The rental was increased by 10% with effect from 01 December 2020. Make the necessary adjustment. Interest on loan for February 2021 has not been paid, The insurance total includes an annual premium of R4 800 that was paid for the period 01 June 2020 to 31 May 2021. Cash deposit fees of R600 that appeared in the February 2021 bank statement were left out in error when the cash journals for February 2021 were prepared and posted. Provide for depreciation as follows: 11.1 On equipment at 10% per annum on cost. Note: Equipment that cost R20 000 was purchased on 01 September 2020. The purchase has been recorded. 11.2 On vehicles at 20% per annum on the diminishing balance
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Prepare the statement of comprehensive income of royal tradersfor the year ended 28 Feb 2021.
INFORMATION
The
Royal Traders on 28 February 2021, the end of the financial year.
ROYAL TRADERS
PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2021
Debit (R) Credit (R)
Balance sheet accounts section
Capital 301 000
Drawings 134 720
Vehicles at cost 360 000
Equipment at cost 240 000
Accumulated depreciation on equipment 62 000
Trading inventory 140 000
Debtors control 62 000
Provision for
Bank 42 800
Cash float 1 000
Creditors control 82 800
Mortgage loan: Leo Bank (18% p.a.) 160 000
Nominal accounts section
Sales 1 000 000
Cost of sales 480 000
Sales returns 8 000
Salaries and wages 178 000
Bad debts 2 000
Stationery 4 000
Rent expense 42 880
Motor expenses 34 000
Bad debts recovered 2 000
Telephone 14 000
Electricity and water 24 000
Bank charges 6 000
Insurance 12 000
Interest on mortgage loan 26 400
Commission income 10 000
1 811 800 1 811 800
Adjustments and additional information
- According to the physical stocktaking completed on 28 February 2021, the following inventories were on hand:
1.1 Trading inventory, R136 000
1.2 Stationery, R600.
- An
account received from Airtel Fitters on 28 February 2021 for the installation of an air conditioning unit in one
of the vehicles was debited to the motor expenses account in error, R6 000.
- No entry has been made for interest at 12% p.a. that was charged for two months on the overdue account of a
debtor who owed R6 000.
- An electronic funds transfer for R1 330 was made to Royal Traders on 28 February 2021 from a debtor, after a
settlement discount of 5% was deducted. No entries have been made for this transaction.
- The provision for bad debts must be decreased to R3 000.
- The telephone account for February 2021 was due to be paid on 02 March 2021, R1 400.
- Rent expense has been paid up to 31 March 2021.Note:The rental was increased by 10% with effect from
01 December 2020. Make the necessary adjustment.
- Interest on loan for February 2021 has not been paid,
- The insurance total includes an annual premium of R4 800 that was paid for the period 01 June 2020 to 31
May 2021.
- Cash deposit fees of R600 that appeared in the February 2021 bank statement were left out in error when the
cash journals for February 2021 were prepared and posted.
- Provide for depreciation as follows:
11.1 On equipment at 10% per annum on cost.
Note: Equipment that cost R20 000 was purchased on 01 September 2020. The purchase has been
recorded.
11.2 On vehicles at 20% per annum on the diminishing balance
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