Tutorial 11 Preparation of Financial Statements 1 LTJ 2018

Tutorial 11 – Finalised Financial Statements and Closing Entries Bank 11,000

1. What are closing entries? How are they being carried out?
2. How do you treat the drawings account at year end? Additional information:
1. Closing inventory was valued at cost RM25,100 but the market
Question 3: value was RM32,900
2. Insurance premium was paid for the year ended 31 December 2017.
Excelsior Trading extracted the following balances from the business Prepaid expences 4 month 3600/12x4month(-)
ledgers as at 31 August 2017:
Dr Cr 3. Received rent for the six months ended 30 September 2017
RM RM Rental received in advance(c.liability)=800
Furniture & Fittings 50,000 Rental income (in spl)=4800-(1/6 x 4800)=4000
Office Equipment 40,000
Accumulated depreciation: office equipment 8,000 4. An additional amount due from Encik Malik of RM1,600 is to be
Motor Vehicles 70,000 written off as bad debts. Allowance for doubtful debts is to be
Accumulated depreciation: motor vehicles 25,200 provided at 5% on outstanding trade receivables.
Drawings 19,100 ALLOWANCE FOR DOUBTFUL DEBT = tr – bad debt x 5%
Capital 140,000 = (46600-1600)x5%=2250
Loan 25,000
Inventory as at 1 September 2016 29,300 5. One third of the wages and salaries was paid to warehouse
Purchases and Sales 89,100 177,300 employees. One fifth of the carriage expenses was to deliver goods to
Returns 3,800 2,600 warehouse
Carriage 4,500 1/3=12000 COGS,2/3=24000 Expences
Wages and salaries (1/3 to COGS, 2/3 TO 36,000 1/5 x 4500 = 900
Expenses) 6. Received utilities bill RM800 for August 2017, but no payment has
Discounts 2,300 1,300 been made (c.liability)
Rent 4,800- 7. Depreciation is to be provided as follows:
800 Furniture & fittings : 20% per annum at cost
Interest 1,800
Insurance (3600 – 1200) 3,600 Office equipment : 20% per annum using
Utilities (5000+800) 5,000 straight-line method
Bad debts +1600 1,900
Trade receivables and payables 46,600(- 31,300 Motor vehicles : 20% per annum using
1600) reducing-balance method
Allowance for doubtful debts 1,500
Tutorial 11 Preparation of Financial Statements 2 LTJ 2018

Required:
(a) Prepare the Statement of Profit or Loss for Excelsior Trading for the
year ended 31 August 2017.

(b) Prepare the Statement of Financial Position as at that date.

Question 4:

Slow & Steady Enterprise is operated by Mr. Alan Cool. He provided the Additional information:
following Trial Balance for the year ended 30 June 2017: 1. Closing inventory was valued at RM185,000.
Dr Cr 2. General expenses accrued were RM480 as at year end.(c.liability)
RM RM (2200+480)=2680
Inventory, 1 July 2016 160,000 3. Alan had been taking goods from the business for his family use
8% Long term loan (8%x200000) 200,000 during the year amounting to RM500 per month. No recording had yet
Water and electricity 4,300 been done.DR Drawing +500x12= 6000
Bank 6,000 4. Commission received outstanding was RM1,000 as at year end.
Capital 1,000,000 C.asset
Carriage inwards 1,800 5. Allowance for doubtful debts is to be provided at 2% on trade
Purchases(-6000) and Sales 956,000 1,254,600 receivables outstanding. 136000x2% = 2720
Cash 8,800 6. Interest on loan has been overlooked by the book-keeper, only
Allowance for doubtful debts, 1 July 2016 1,000 partly settled. 12500Accrued interest on loan (c.liability)
Custom duty 3,000 7. Depreciation charges – Motor vehicles (20% on reducing
Trade receivables and payables 136,000 68,000 balance)
Bad debts 3,700 Plant and machinery (15% on cost)
Carriage outwards 3,000 Required:
Drawings 12,000
Freehold premises 800,000 Prepare the following for Slow & Steady Enterprise:
Motor vehicles 100,000
Plant and machinery 300,000 a) Statement of Profit or Loss for the year ended 30 June 2017;
Accumulated depreciation: motor vehicles 12,000
Accumulated depreciation: plant & machinery 24,000 b) Statement of Financial Position as at 30 June 2017.
General expenses 2,200
Interest on loan(already paid) 3,500
Discounts 600 800
Advertisement 16,000
Returns 4,500 3,000
Salaries 60,000
Commission received 6,000
2,575,400 2,575,400
Tutorial 11 Preparation of Financial Statements 4 LTJ 2018

Additional information:
Question 5 1. Inventory at the end of the accounting year was RM7,035. CA
2. Salaries and wages outstanding were RM150 and utilities paid in
Charles X is a stationery retailer. The following are the balances extracted advance were RM120. CL 150, CA 120
from his ledger accounts as at 30 June 2017: 3. Non-current assets are to be depreciated as follows:
- Premises at 10% per annum using straight line method 5600
RM RM - Motor vehicles at 15% per annum using reducing balance
Inventory @ 1 July 2016 5,300 Purchases 41,120 method6069
Repairs and maintenance 900 Sales 51,420 4. Bad debts to be written off amounted to RM700 and the owner has
Salaries and wages 2,300+150 Returns inwards 1,730 decided to provide an allowance for doubtful debts at 10% of total trade
Premises at cost 70,000 Returns outwards 2,200 receivables.
Accumulated depreciation Utilities 650- 5. Bank loan interest for the year is still outstanding as at year end960
: Premises 14,000 Drawings 2,100 6. Drawings made by Charles for personal use but not recorded in the
Motor vehicles 56,000 Discount allowed 650 books were as follows:
Accumulated depreciation Discount received 2,270 - Goods for resale amounting to RM1,265
: Motor vehicles 15,540 Advertising 610 - Cash valued at RM1,050
Insurance on goods 150 Duty on imports 520 7. An error was found in which one third of the carriage inwards should
purchased be regarded as carriage outwardsCI = 440, CO=940
Trade receivables (gross) 3,170 Capital 82,350
Trade payables 2,560 Bad debts 400+70 Required:
0 (a) Prepare the Trial Balance (before making the adjustments in the
Allowance for doubtful 290 Rent 1,050 additional information) as at 30 June 2017;
debts
Commission received 3,200 Bank overdraft 1,200 (b) Prepare Statement of Profit or Loss (after making the adjustments in the
6% Long term bank loan 16,000 Cash in hand 3,000 additional information) for the year ended 30 June 2017; and
Carriage inwards 660 Carriage outwards 720
(c) Statement of Financial Position as at 30 June 2017.
Tutorial 11 Preparation of Financial Statements 5 LTJ 2018

Section B: Extra exercise questions (for students’ own practice)

Question 1:

The following Trial Balance was extracted from the books of Seahorse Additional information:
Trading, a sole proprietor business, at 30 June 2017: 1. Inventories as at 30 June 2017 were RM47,342.
2. Non-current assets are to be depreciated as follows:
Dr Cr Motor vehicles : 20% per annum on cost
RM RM Office equipment : 10% per annum on net book value
Owner’s equity as at 1 July 2016 86,631 3. On 30 June 2017, the owner withdrew cash of RM1,250 for household
Drawings 8,500 expenses. No entry has been made in the books.
Inventories as at 1 July 2016 54,387 4. Utilities in the Trial Balance include an electricity bill covering the
Bank 153,246 period 16 June to 15 July 2017 amounting to RM900.
6% Bank loan repayable in 8 years 80,000 5. Allowance for doubtful debts RM907 is to be provided at the year end.
Trade receivables and payables 45,329 58,128 6. The bank loan was taken on 1 October 2016 and no interest was paid
Motor vehicles at cost 60,000 during the accounting year.
Accumulated depreciation-motor vehicles 6,000
Office equipment at cost 25,858 Required:
Accumulated depreciation-office equipment 4,858
Sales and Purchases 386,768 600,235 (a) Prepare the Statement of Profit or Loss of Omega Shoes for the year
Returns 4,586 3,854 ended 30 June 2017; and
Discounts allowed and Discount received 15,844 18,129
Bad debts 7,287 (b) Prepare the Statement of Financial Position as at that date.
Allowance for doubtful debts as at 1 July 2016 678
Rent 18,000
Insurance – motor vehicles 1,452
– inventories 3,626
Carriage outwards 7,295
Salaries and wages 45,853
Printing and stationery 12,587
Utilities 7,895
858,513 858,513
Tutorial 11 Preparation of Financial Statements 6 LTJ 2018

Question 2:

The following Trial Balance was extracted from the books of Mr Fujiyama Additional information:
as at 31 December 2017: 1. Rent received in arrears as at 31 December 2017 was RM1,000.
2. Insurance includes RM2,000 paid for January and February 2018.
Debit Credit 3. Depreciation charges are to be provided as follows:
RM RM - Motor vehicles at 10% per annum on net book value
Sales and Purchases 68,080 215,580 - Buildings at the rate of 1% per annum on cost
Returns 220 380 4. Electricity charges outstanding for the year amounted to RM590.
Inventories as at 1 January 2017 18,400 5. Allowance for doubtful debts is to be increased by RM500.
Rent received 9,000 6. Inventories as 31 December 2017 was RM6,520.
Building at cost 520,000
Advertising expenses 27,600 Required:
Trade receivables and Trade Payables 168,000 100,000
Salaries and wages 68,000 Prepare the Statement of Profit or Loss for the year ended 31 December
Motor vehicles at cost 100,000 2017 and the Statement of Financial Position as at that date.
Insurance 24,000
Sundry expenses 15,000
Accumulated depreciation: Motor vehicles 40,000
Accumulated depreciation: Buildings 64,000
Electricity and water 7,100
Allowance for doubtful debts 1,200
Discounts 3,000 7,000
Printing and stationery 2,496
Cash in hand 136,000
Bank overdraft 736
Capital 720,000
1,157,896 1,157,896