Assignment Task
OBJECTIVE
The aim of this individual assignment is to enhance the ability of students to apply financial accounting concepts and treatments to practical business scenarios based on the knowledge gained from studying the subject.
SCENARIO
You friend Ahmed started his own business on 1st January 2017. He is hoping to expand this business and needs your help as an accountant to complete his financial statements and prepare a report so that he could present it to the relevant people to request for financial help. This report should focus on how you would apply what you have studied in Financial Accounting to the given scenario. Ahmed has provided you with the following details for his business for the year ended 31 December 2020.
Items Amounts ($)
Bank 48600
Trade receivables 32700
Inventories at 1 January 2020 9090
Machinery 157000
Fixtures and Fittings 67800
Accumulated depreciation –
Machinery 25500
Accumulated depreciation – Fixtures
and Fittings 18800
Trade payables 20800
5?nk loan 50100
Capital 132300
Allowance for Receivables 1580
Sales revenue 427700
Discount Received 2020
Purchases 214800
Discount Allowed 2120
Salaries and wages expense 72400
Administrative expenses 19000
Marketing expenses 7700
Purchases returns 1170
Sales Returns 480
Utilities expense 7390
Insurance expense 2400
Rental expense 30300
Drawings 8190
The following additional information were also available:
1- Inventory at 31 December 2020 is $6500.
2- At the end of the year, the business has sold for $4040 Machinery which it purchased on 1st July 2018 for $9200. Assume that the business depreciates its Machinery at 20% per annum using the reducing balance. No entries were made in the accounting records for this disposal. The business depreciates its Fixtures and Fittings at 15% per annum using the straight-line method.
3- The business pays for its office rent expense quarterly in arrears on 1 April, 1 July, 1 October and 1 January each year in equal instalments. The office rent is $29000 per year and the rent for the last quarter is still outstanding. The amount for insurance includes $2600 paid on 1 May 2020 as annual insurance.
4- During the year a debt of $2210 was declared irrecoverable and was written off. The business allows a special allowance of 20% on a debt of $1520 and it is the policy to make a general allowance of 11% of receivables.
5- On 1st January 2020, the payable control account showed a debit balance of $2250 and the receivables control account showed a credit balance of $1150. These amounts were settled before the end of the year. Furthermore, an amount of $1750 due from a customer as shown by receivables ledger was offset against amount due to the same firm as shown by payables ledger. Cheques and cash received from credit customers amounted to $320400 while cheques and cash paid to credit suppliers were $122400. Cash sales and cash purchases were $93000 and $79600 respectively. Both discounts and returns were related to credit sales and credit purchases only.
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