The trial balance of Norr Ltd at 31 December 20X7 appeared as follows:
|
£ |
£ |
|
|
Ordinary shares of £1 – fully paid |
50,000 |
|
|
Purchases |
220,000 |
|
|
Retained profit |
30,000 |
|
|
Freehold property – cost |
80,000 |
|
|
Fixtures – cost |
15,000 |
|
|
Fixtures – accumulated depreciation |
9,000 |
|
|
Rates |
3,000 |
|
|
Motor vehicles – cost |
28,000 |
|
|
Motor vehicles – accumulated depreciation |
14,000 |
|
|
Insurance |
2,000 |
|
|
Inventory |
40,000 |
|
|
Trade receivables |
30,000 |
|
|
Trade payables |
24,000 |
|
|
Sales |
310,000 |
|
|
Bank |
12,100 |
|
|
12% debentures |
40,000 |
|
|
Debenture interest |
2,400 |
|
|
Wages and salaries |
34,000 |
|
|
Heat and light |
4,100 |
|
|
Professional fees |
3,900 |
|
|
General expenses |
1,200 |
|
|
Motor expenses |
2,000 |
|
|
Provision for doubtful debts |
1,000 |
|
|
Bad debts |
300 |
|
|
478,000 |
478,000 |
Additional information:
1. During the year a motor vehicle, purchased on 31 March 20X4 for £8,000, was sold for £3,000. The sale proceeds were debited to the bank account and credited to the sales account but no other entries have been made in the accounts relating to this transaction.2. Depreciation has not yet been provided for the year. The following rates are applied on a straight line basis, with the assumption of no residual value:
Fixtures and fittings10 per cent
Motor vehicles20 per cent
The company’s policy is to provide a full year’s depreciation in the year of acquisition and no depreciation in the year of disposal.
3. Inventory at 31 December 20X7 amounted to £45,000.4. Rates paid in advance amount to £400. Insurance includes £200 paid in advance. An electricity bill covering the quarter to 31 December 20X7 and amounting to £320 was not received until February 20X8. It is estimated that the audit fee for 20X7 will be £1,500.5. A general provision for doubtful debts of 4 per cent of trade receivables is to be carried forward.
REQUIRED:
Prepare an Income Statement and Balance Sheet for the year to 31 December 20X7.
Identify and discuss the key characteristics that accounting information should possess in order to satisfy the needs of the users of that information. What conflicts can arise between those characteristics and how can they be resolved?
Explain why a business depreciates assets and what the resulting net book value in the balance sheet represents.
Identify 3 different types of business entities and summarise the key characteristics of each.
