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Departmental Final Accounts of a Limited Company The firm Kilroy Ltd., is divided into two departments – Sportswear and Footwear - Leaving Cert Accounting - Question 1 - 2006
Question 1
Departmental Final Accounts of a Limited Company The firm Kilroy Ltd., is divided into two departments – Sportswear and Footwear. The following balances were extrac... show full transcript
Worked Solution & Example Answer:Departmental Final Accounts of a Limited Company The firm Kilroy Ltd., is divided into two departments – Sportswear and Footwear - Leaving Cert Accounting - Question 1 - 2006
Step 1
Departmental Trading and Profit and Loss Account for the year ended 31/12/2005
Answer
To prepare the Departmental Trading and Profit and Loss Account, we need to calculate the sales, cost of goods sold, and gross profit for both the Sportswear and Footwear departments. We follow these sub-steps:
Calculate Total Sales Returns:
- Total sales for Sportswear can be calculated from purchases and any returns. We already have the returns as €4,000.
Cost of Sales Calculation:
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For Sportswear, we have:
- Stock at 1/1/2005: €63,000
- Purchases: €32,000
- Less: Stock at 31/12/2005: €45,000
The Cost of Sales = Opening Stock + Purchases - Closing Stock
Sportswear Cost of Sales = €63,000 + €32,000 - €45,000 = €50,000
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For Footwear:
- Stock at 1/1/2005: €38,000
- Purchases: €360,000
- Less: Stock at 31/12/2005: €32,000
Footwear Cost of Sales = €38,000 + €360,000 - €32,000 = €366,000
Calculate Gross Profit:
-
Gross Profit is calculated as Total Sales - Cost of Sales. Using the calculated information:
Sportswear Gross Profit = Sales - Cost of Sales.
Footwear Gross Profit = Sales - Cost of Sales.
List of Expenses:
- Include administration costs, depreciation, insurance, etc., which must be deducted from gross profit to find net profit.
Finally, the overall profit can be depicted clearly in the account format to show the net profits for both departments.
Step 2
Balance Sheet as at 31/12/2005
Answer
To prepare the balance sheet as of 31/12/2005, we need to categorize assets and liabilities. We follow these steps:
List Tangible Fixed Assets:
-
Fixed assets include Buildings and Delivery vans. Subtract accumulated depreciation from the total.
-
Net Tangible Fixed Assets:
- Buildings: €500,000 - €50,000 (for 3% depreciation) = €450,000
- Delivery vans: €90,000 - €16,000 = €74,000
Current Assets:
- Current assets consist of stocks, cash, and debtors.
- Calculate each part:
- Stocks: Total €77,000.
- Insurance prepaid, cash, and trade debtors combined.
Liabilities:
- Creditor amounts due within and after one year, plus current liabilities like PAYE, PRSI, and VAT.
- Determine total liabilities to subtract from assets.
Finally, summarize the totals correctly in the balance sheet format to reflect overall equity and reserves.