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Sole Trader - Final Accounts The following Trial Balance was extracted from the Books of Orla Dolan on 31/12/2007: Buildings (Cost €800,000) 485,600 € Delivery Vans (Cost €85,000) 73,000 € 8% Investments (1/4/2007) 13,000 € 6% Fixed Mortgage (including interest of €50,000) 150,000 € Patents 22,400 € Debtors and Creditors 412,400 € Purchases and Sales 512,400 € 729,000 € Stock 1/1/2007 65,600 € Commission 26,600 € Salaries and General Expenses 85,800 € Provision for Bad Debts 1,200 € Discount (net) 1,900 € Rent 2,900 € Mortgage interest paid for the first three months 1,250 € Insurance (incorporating Suspense) 6,150 € VAT 4,100 € Bank 5,900 € PRSI 3,900 € Drawings 36,200 € Capital 1,502,100 € The following information and instructions are to be taken into account: (i) Stock at 31/12/2007 at cost was €75,000 - Leaving Cert Accounting - Question 1 - 2008
Question 1
Sole Trader - Final Accounts The following Trial Balance was extracted from the Books of Orla Dolan on 31/12/2007: Buildings (Cost €800,000) 485,600 € Delivery Van... show full transcript
Worked Solution & Example Answer:Sole Trader - Final Accounts The following Trial Balance was extracted from the Books of Orla Dolan on 31/12/2007: Buildings (Cost €800,000) 485,600 € Delivery Vans (Cost €85,000) 73,000 € 8% Investments (1/4/2007) 13,000 € 6% Fixed Mortgage (including interest of €50,000) 150,000 € Patents 22,400 € Debtors and Creditors 412,400 € Purchases and Sales 512,400 € 729,000 € Stock 1/1/2007 65,600 € Commission 26,600 € Salaries and General Expenses 85,800 € Provision for Bad Debts 1,200 € Discount (net) 1,900 € Rent 2,900 € Mortgage interest paid for the first three months 1,250 € Insurance (incorporating Suspense) 6,150 € VAT 4,100 € Bank 5,900 € PRSI 3,900 € Drawings 36,200 € Capital 1,502,100 € The following information and instructions are to be taken into account: (i) Stock at 31/12/2007 at cost was €75,000 - Leaving Cert Accounting - Question 1 - 2008
Step 1
(a) Trading and Profit and Loss Account for the year ended 31/12/2007
Answer
To prepare the Trading and Profit and Loss Account, we first calculate the sales, cost of sales, and operating profit.
Step 1: Calculate Sales
- Sales: €729,000
- Less: Cost of Sales
- Opening Stock: €65,600
- Purchases: €490,400
- Less: Closing Stock: €79,800
Cost of Sales Calculation:
Cost of Sales = Opening Stock + Purchases - Closing Stock
= €65,600 + €490,400 - €79,800 = €476,200
Step 2: Gross Profit
- Gross Profit = Sales - Cost of Sales
= €729,000 - €476,200 = €252,800
Step 3: Add Administrative and Selling Expenses
- Total Administration Expenses:
- Patient Write Off: €11,000
- Salaries and General Expenses: €85,800
- Discount: €1,900
- Rent: €2,900
Total Administration Expenses = €11,000 + €85,800 + €1,900 + €2,900 = €101,600
Step 4: Calculate Net Operating Profit
- Operating Profit = Gross Profit - Total Administration Expenses
= €252,800 - €101,600 = €151,200
Step 5: Less Mortgage Interest
- Mortgage Interest: €1,250
Net Profit Calculation:
Net Profit = Operating Profit - Mortgage Interest
= €151,200 - €1,250 = €149,950
Summary
- Net Profit for the year: €149,950.
Step 2
(b) Balance Sheet as at 31/12/2007
Answer
To compile the Balance Sheet, we organize assets, liabilities, and equity.
Assets
- Fixed Assets:
-
Buildings (Cost): €800,000
-
Less: Depreciation (2%): €16,000
-
Net Book Value of Buildings: €784,000
-
Delivery Vans (Cost): €91,000
-
Less: Depreciation: €14,175
-
Net Book Value of Delivery Vans: €76,825
-
Total Fixed Assets: €860,825
-
- Current Assets:
- Stock: €79,800
- Debtors: €40,400
- Total Current Assets: €120,200
Total Assets:
Total Assets = Fixed Assets + Current Assets
= €860,825 + €120,200 = €981,025
Liabilities
- Creditors:
- Creditors: €118,600
- Bank: €5,900
- VAT: €4,100
- PRSI: €3,900
- Mortgage Interest Due: €6,500
- Total Current Liabilities: €138,000
- Long Term Liabilities:
- 6% Mortgage: €150,000
Total Liabilities:
Total Liabilities = Current Liabilities + Long Term Liabilities
= €138,000 + €150,000 = €288,000
Equity
- Capital: €485,000
- Add Net Profit: €149,950
- Less Drawings: €36,200
Total Equity:
Total Equity = Capital + Net Profit - Drawings
= €485,000 + €149,950 - €36,200 = €598,750
Final Balance Sheet:
Total Assets = Total Liabilities + Total Equity
€981,025 = €288,000 + €598,750 + (Remaining Equity)
Conclusion:
The Balance Sheet provides a clear picture of the financial health of the business showing all assets, liabilities, and equity as at 31/12/2007.