FA2 Managing Financial Records

Chap 12 Incomplete Records Activity

Lecturer: Christine Colon, ACCA

Name:
Group:
Date:

Activity 1 - identifying profit using the business

equation (I)
The financial accounts of James Merchants at 31 December 20X1 showed
net assets of $41,500.

On the 29 December 20X2, a burst water pipe caused a flood destroying all
the accounting records. However, the following has been ascertained for 31
December 20X2.

The carrying value of non-current assets at 31 December 20X1 was

$15,000. During the year, a new machine costing $3,000 was purchased.
Depreciation of $4,000 for 20X2 is to be charged.

Unpaid customers' invoices amounted to $12,300, including one debt of

$200 which is to be written off.

Inventories at cost were $25,000 but the net realisable value was $23,000.

The bank statements showed a balance of $15,000 with no outstanding

cheques or lodgements.

Outstanding purchase invoices were $8,000.

There was a capital input of $5,000 and drawings of $14,000 during the
year.

Find the profit for the year ending 31 December 20X2.

Activity 2 - identifying profit using the business
equation (II)
On 1 January 20X5, Joan Updike started working as a financial computer
trainer and technician. She was not expecting her business to grow as
rapidly as it did, and she kept on putting off installing any proper accounting
systems.

You have been asked to calculate how much profit she has made in her first
year of trade.

The following information is available and can be relied upon:

1 The business bank account shows transfers from Joan's private

account, payments for capital items and for drawings. These can be
summarised as follows:

Transfers from Joan's private account $13,000

Purchase of computer hardware and software $9,000
Drawings $18,000

2 There has been no proper control over cash sales and purchases.
However, you are confident that there are no cash purchases for
capital items or cash drawings.

3 The computer hardware and software should have a three-year life.

4 At the year-end there was $37,247 in the business bank account.

There were no unpresented cheques or outstanding lodgements.

5 Joan was owed $2,500 from one customer, and owed $157 to a
supplier.
.
6 Sundry inventory amounted to $54.

Calculate net assets at the end of the first year. Using the business
equation, calculate Joan's net profit for the period.
Activity 3 - balancing figure approach (II)
The balance on the sales ledger control account of Stevens and Sons at the
end of last year was
$12,000.

The total cash received from customers during the year was $40,000.

A review of outstanding sales invoices, unpaid at the year-end showed a

total of $16,000.

Prepare the sales ledger control account.

Activity 4 - balancing figure approach (Ill)
Payments made in respect of credit purchases per the bank account totalled
$25,000 (see example above). Stevens says that the business currently
owes about $5,000 for building materials. At the same time last year the
business owed $7,000.

Work out the purchases for the year.

Activity 5 - profit mark-up
Jones applies a mark-up of 40% to his purchases. If his sales for the year
are $150,000 what will be his expected gross profit?

Activity 6 - profit margin

Filbert consistently achieves a gross margin of 25%. What will his sales be
to achieve a profit of $50,000?
Activity 7 - balancing figure approach (I)
The accounting books of Stevens and Sons have not been kept up to date.
The bank and cash accounts need to be created from the following
information:

The balances on the accounts from the previous year's financial accounts
are:

Bank $33,000 Dr
Cash $2,000 Dr

During the year, $40,000 was received from customers for sales. Cash
expenses totalled $1,000 and $38,000 was paid into the bank.

Cheque payments for expenses were $20,000 for salaries and $5,000 for
rent. Credit purchases paid for were $25,000.

The closing balance on the bank statement was $13,000 but there was a
cheque not yet presented at the year-end of $2,000.

Stevens regularly wrote cheques to himself for drawings, but could not
remember how much these were for.

Write up both the cash at bank and cash in hand accounts for the year.