1 The following Trial Balance was extracted from the books of Salem Ahmed at 31 July

2006.

$ $
Capital 62 000
Drawings 7 200
Premises at cost 38 000
Fixtures at valuation 7 800
Equipment at cost 5 000
Provision for depreciation of equipment 950
Provision for doubtful debts 130
Debtors 9 000
Bad debts recovered 170
Creditors 7 970
Bank 4 755
Stock 1 August 2005 10 260
Sales 89 500
Purchases 65 700
Sales returns 1 100
Carriage outwards 210
Discount allowed 600
Discount received 610
Administration expenses 21 215
166 085 166 085

Additional information

1 During the year ended 31 July 2006 Salem took goods costing $1260 for his
own use. No entries had be en mad e
w w w
i n the a cc ou nti ng re co rd s.
. ig c s e a c c o u n
2 The provision for doubtful debts is to be maintained at 2 % of the debtors.

3 Equipment is to be depreciated at 10 % per annum using the reducing balance

method.

4 Fixtures were valued at $7250 on 31 July 2006. No fixtures were bought or

sold during the year ended 31 July 2006.

5 Because of illness, Salem was unable to value the stock on 31 July 2006.
Salem’s gross profit margin is 25 %.

REQUIRED

Prepare the Trading and Profit and Loss Account of Salem Ahmed for the year
ended 31 July 2006.

The value of the stock on 31 July 2006 should be clearly shown in the Trading Account
Gorman Limited has prepared the following trial balance from the company’s accounting
records for the year ended 30 September 2010. For
Examiner's
Gorman Limited Use
Trial Balance at 30 September 2010

$ $
Bank (overdrawn) 2 200
Revenue (sales) 92 000
Ordinary goods purchased (purchases) 70 300
Carriage inwards 600
Inventory (stock) at 1 October 2009 13 900
Rent payable 2 600
Property tax 1 500
Electricity 850
Wages and salaries 5 250
Equipment and office fittings 17 000
Provision for depreciation
on equipment and office fittings 1 700
Repairs and maintenance 1 100
Administrative expenses 4 000
Retained profit at 1 October 2009 28 000
Share capital 9 000
Trade receivables (debtors) 17 600
Trade payables (creditors) 1 800
134 700 134 700

www.igcseaccounts.com
Additional information

1 Inventory (stock) at 30 September 2010 was $14 300.

2 Wages accrued but unpaid were $500.

3 Property tax prepaid was $300.

4 The bank statement for 30 September showed bank charges of $120. This has
not been entered in the books.

5 Depreciation of $1700 is to be provided for the year.

R EQ UIR ED
4 Timpani Ltd makes machine parts and their financial year ends on 31 March. After preparing For
the income statement (trading and profit and loss account) for the year ended 31 March Examiner's
Use
2010 the trial balance showed the following items.

$
Bank 500 Dr
Bank loan (repayable 2011) 2 800
Trade payables (creditors) 700
Trade receivables (debtors) 1 000
Plant and equipment 20 000
Provision for depreciation 12 000
Inventory (stock) at cost 3 000
Share capital 5 000
Profit for the year 4 000

Timpani Ltd found that the inventory (stock) could be sold for only $2700.

REQUIRED

( a ) (i) State the basis on which inventory (stock) should be valued at the end of a
financial year.

[3]

( ii ) State the v a l ue that Ti m pani Ltd s ho u l d use for i n v e ntory (stock) i n the b a l a n c e
w w w . ig c s e a c c o u n t s . c o m
sheet at 31 March 2010.

[1]

( ii i) State the effect on the company’s profit for the year of adjusting the value of
inventory (stock).

[2]
 1 The following trial balance was extracted from the books of Robbie McDonald at For
30 September 2010. Examiner's
Use

Dr Cr
$ $
Capital 85 000
Drawings 5 100
Premises at cost 58 000
Motor vehicle at cost 6 000
Equipment at valuation 3 000
Provision for depreciation of motor vehicle 1 200
Provision for doubtful debts 372
Trade receivables (debtors) 17 600
Bad debts recovered 160
Trade payables (creditors) 16 250
Bank overdraft 7 728
Inventory (stock) 1 October 2009 19 500
Revenue (sales) 216 000
Purchases 176 000
Wages 28 200
Property tax and insurance 8 900
Administration expenses 4 410
326 710 326 710

Additional information

1 Because of an oversight the inventory (stock) on 30 September 2010 was

www.igcseaccounts.com
not valued. Robbie marks up all his stock by 25%.

2 During the year ended 30 September 2010 Robbie took goods costing $1900
forhis own use. No entries have been made in the accounting records.

3 The motor vehicle is being depreciated at 20% per annum using the
reducing balance method.

4 Equipment was valued at $2340 on 30 September 2010. There were no sales

orpurchases of equipment during the year.

5 The provision for doubtful debts is to be maintained at 2% of the trade

receivables(debtors).

6 A bank statement received on 30 September 2010 included an entry for

bankinterest of $1550. No entries have been made in the accounting records.

7 The property tax and insurance includes $2400 for insurance of the premises.
Thisrepresents insurance cover for the sixteen months to 31 January 2011.

REQUIRED

Prepare the income statement (trading and profit and loss account) of Robbie McDonald for
the year ended 30 September 2010.

The value of the inventory (stock) on 30 September 2010 should be clearly shown in the
income statement (trading and profit and loss account).

. Robbie marks up all his stock by 25%.