Class Exercises – Financial Statements

Question 1

Sarahani is the owner of SH Trading, the business dealing with wholesaler of electrical
appliances. Below is the trial balance extracted from the books of SH Trading as at 31
December 2019.

Particulars Debit (RM) Credit (RM)

Capital as at 1 January 2019 96,548
Drawings 13,350
Inventories as at 1 January 2019 12,870
Accounts Receivable 8,400
Accounts Payable 7,170
Returns inwards 772
Returns outwards 604
Furniture and Fittings 18,720
Plant and Machinery 70,000
Cash at bank 11,380
Discount received 405
Discount allowed 195
Wages 3,460
Salaries 7,950
Electricity and water 510
Sales 101,061
Purchases 63,228
Stationeries 225
Insurance 3,600
Accumulated Depreciation as at 1 January 2019:
Furniture and Fittings 1,872
Plant and Machinery 7,000
214,660 214,660
=
Additional information:

1. One of the accounts receivables returned defective good amounting RM110 to the
business. This transaction was not recorded in the books yet.

2. Allowance for doubtful debts of 5% was to be provided on the net accounts receivable.

3. The closing inventories were valued at RM6,500.

4. Prepayment of insurance premium and wages were RM150 and RM300 respectively.

5. Depreciation for the year is to be provided as follows:

Furniture and Fittings at 10%, straight line method, yearly basis

 Plant and Machinery at 10%, reducing balance method, yearly basis.

6. The owner took goods amounting RM400 for her personal use.

7. The accruals of electricity and salaries were RM100 and RM200 respectively.

8. A long-term loan from Bank Niaga amounted to RM50,000 was received by cheque on 1
June 2019. The first interest payment was due on 1 July 2019. The 4% interest on loan is
still accrued at the end of the year.

Required:

a. The Statement of Profit or Loss for the year ended 31 December 2019.

SH TRADING
Statement of Profit or Loss for the year ended 31 December 2019
RM RM RM
Sales Revenue
Sales 101, 061
(-) Return inwards (772+110) (882) 100, 179

Cost of Sales
Opening inventory 12, 870
Purchases (63,228 – 400) 62,828
(-) Return outwards (604) 62,224
73,924
(-) Closing inventory (6,500)
COST OF GOODS SOLD (68,594)
GROSS PROFIT 31, 585

Other revenues
Discount received 405
31,990
Operating expenses
Discount allowed 195
Wages (3,460 – 300) 3,160
Salaries (7,950 + 200) 8,150
Electricity and water (510 + 100) 610
Stationeries 225
Insurance (3,600 – 150) 3,450
Increase in allowance for doubtful debts (8,290 x 5%) 415
Depreciation – Furniture & Fittings (10%18,720) 1,872
Depreciation – Plant & Machinery [10% x (70,000 –7000) 6,300
Interest on loan (50,000 x 4% x 6/12) 1,000
(25,377)
NET PROFIT 6,613
b. The Statement of Financial Position as at 31 December 2019.

SH TRADING
Statement of Financial Position as at 31 December 2019
RM RM RM
NON-CURRENT ASSETS Cost Acc. Dep. NBV
Furniture & Fittings 18,720 3,744 14,976
Plant & Machinery 70,000 13,300 56,700
Total Non-Current Assets 71,676

CURRENT ASSETS
Closing inventory 6,500
Accounts Receivable (8,400 – 110) 8,290
(-) Allowance for Doubtful Debt (5% x 8,290) (415) 7,875
Prepaid insurance 150
Prepaid wages 300
Cash at bank (11380 + 50,000) 61,380
Total Current Assets 76,205
147,881
Financed by:
Owner’s Equity
Opening Capital 96,548
(+) Net Profit 6,613
103,161
(-) Drawings (13,350 + 400) (13,750)
Ending Capital 89,411

CURRENT LIABILITIES
Accounts Payable 7,170
Accrued electricity 100
Accrued salaries 200
Accrued interest on loan 1,000
Total Current Liabilities 8,470

LONG TERM LIABILITY

Loan – Bank Niaga 50,000
147,881
Question 2

The trial balance below showed the accounts' balances of Liza Enterprise which is wholly owned
by Puan Liza as at 31 December 2019.

Particulars Debit (RM) Credit (RM)

Purchases and sales 180,000 220,000
Discount allowed and discount received 2,550 400
Returns inwards and returns outwards 9,000 13,500
Carriage outwards 1,050
Carriage inwards 600
Inventory as at 1 January 2019 36,000
Advertisement 4,900
Dividend received 1,500
Electricity 1,500
Commissions 2,100 7,000
Insurance 3,700
Rentals 11,750 2,700
Salaries 20,500
Allowance for doubtful debt 300
Accumulated depreciation:
Machinery 1,500
Motor vehicle 25,500
Accounts receivable and accounts payable 121,000 134,000
Drawings 3,000
Cash 750
Bank 10,200
Capital 167,200
Loan from Bank Simpanan Malaya 165,000
Machinery 6,000
Motor vehicles 75,000
Investments 9,000
Freehold Premises 240,000
738,600 738,600

Additional information:

1. Inventory as at 31 December 2019 is RM105,000.

2. Rent received is for the period from 1 January 2019 to March 2020.

3. RM300 electricity was paid in advance, while rental expenses RM750 was owing at
the end of the year.

4. Puan Liza had withdrawn RM1,500 cheque and RM3,500 goods for her family use.
 5. Allowance for doubtful debts is to be increased by RM500.

6. Additional bad debt to be written off was RM200.

7. Insurance amounting RM300 was still outstanding at the end of the accounting period.

8. The loan from Bank Simpanan Malaya was obtained on 1 May 2019. The first
payment of interest on loan of 5% per annum starts in May 2019 and was still
outstanding at the end of the year.

9. Current year depreciation to be charged is as follow:

Machinery RM600
Motor Vehicles RM9,900

Required:
a. Prepare a statement of profit or loss for the year ended 31 December 2019.

Liza Enterprise
Statement of Profit or Loss for the year ended 31 December 2019
RM RM RM
Sales Revenue
Sales 220,000
(-) Return inwards (9,000) 211,000

Cost of Sales
Opening inventory 36,000
Purchases (180,000 –3,500) 176,500
(-) Return outwards (13,500) 163,000
199,00
(+) Carriage inwards 600
199,600
(-) Closing inventory (105,000)
COST OF GOODS SOLD (94,600)
GROSS PROFIT 116,400

Other revenues
Discount received 400
Dividend received 1,500
Commission received 7,000
Rental received (2,700 x 12/15) 2,160 11,060

Operating expenses
Carriage outwards 1,050
Discount allowed 2,550
 Advertisement 4,900
Electricity (1,500 – 300) 1,200
Commissions 2,100
Insurance (3,700 + 300) 4,000
Rental expenses (11,750 + 750) 12,500
Allowance for doubtful debts 500
Bad debts 200
Salaries 20,500
Interest on loan (165,000 x 5% x 8/12) 5,500
Depreciation – Machinery 600
Depreciation – Motor vehicles 9,900
(65,500)
NET PROFIT 61,960

b. Prepare a statement of financial position as at 31 December 2019.

Liza Enterprise
Statement of Financial Position as at 31 December 2019
RM RM RM
NON-CURRENT ASSETS Cost Acc. Dep. NBV
Freehold Premises 240,000
Machinery 6,000 2,100 3,900
Motor vehicle 75,000 35,400 39,600
Investment 9,000
Total Non-Current Assets 292,500

CURRENT ASSETS
Closing inventory 105,000
Accounts Receivable 121,000
(-) Bad debts (200)
(-) Allowance for Doubtful Debt (300+500) (800) 120,000
Prepaid electricity 300
Cash 750
Bank (10,200 – 1,500) 8,700
Total Current Assets 234,750
527,750
Financed by:
Owner’s Equity
Opening Capital 167,200
(+) Net Profit 61,960
228,860
(-) Drawings (3,000 + 1,500 + 3,500) (8,000)
Ending Capital 221,160

CURRENT LIABILITIES
Accounts Payable 134,000
Prepaid rent received (2,700 x 3/15) 540
 Accrued rental expenses 750
Accrued insurance 300
Accrued interest on loan 5,500
Total Current Liabilities 141,090

LONG TERM LIABILITY

Loan – Bank Simpanan Malaya 165,000
527,250
Question 3

Puan Mona is the owner of Mona Enterprise. The financial year end of the business is on
31 December annually. Below is the trial balance Enterprise as at 31 December 2019.

Debit Credit
(RM) (RM)
Purchases and sales 52,000 109,200
Inventory as at 1 January 2019 6,500
Drawing 7,800
Capital as at 1 January 2019 61,360
Cash in hand 3,900
Bank overdraft 5,200
Discount allowed and discount received 1,040 1,560
Returns inwards and returns outwards 3,900 3,120
Carriage inwards 2,080
Carriage outwards 4,160
Rent 15,600
Wages and salaries 23,400
Insurance 1,820
General expenses 520
Electricity and telephone expenses 1,300
Furniture and Fittings at cost 44,200
Office Equipment at cost 39,000
Accumulated Depreciation - Furniture and Fittings 1,820
Accumulated Depreciation - Office Equipment 2,600
Accounts receivables and accounts payables 16,640 8,320
Allowance for Doubtful Debts as at 1 January 2019 2,080
Bank Loan 26,000
Interest Expense 1,300
Commission revenues 3,900
225,160 225,160
Additional information:
1. Insurance prepaid for the year was RM260.

2. Puan Mona took RM500 cash for her daughter's wedding ceremony.

3. Commission revenue was accrued amounting RM1,040 at the end of the year.

4. Interest expense accrued is RM260.

5. RM200 electricity bill was erroneously recorded as general office expenses.

6. Closing inventory as at 31 December 2019 was RM10,400.

7. Bad debts of RM840 are to be written off and the allowance for doubtful debts is
to be adjusted at 10% of net accounts receivables.
8. Depreciation on furniture and fittings was provided at 5% on straight line method,
yearly basis while the office equipment was provided at 10% on reducing balance
method, yearly basis.

Required:
a. The statement of profit or loss for the year ended 31 December 2019.

Mona Enterprise
Statement of Profit or Loss for the year ended 31 December 2019
RM RM RM
Sales Revenue
Sales 109,200
(-) Return inwards (772+110) (3,900) 105,300

Cost of Sales
Opening inventory 6,500
Purchases (180,000 –3,500) 52,000
(-) Return outwards (3,120)
(+) Carriage inwards 2,080 50,960
57,460
(-) Closing inventory (10,400)
COST OF GOODS SOLD (47,060)
GROSS PROFIT 58,240

Other revenues
Discount received 1,560
Commission received (3900+1040) 4,940 6,500

Operating expenses
Discount allowed 1,040
Allowance for doubtful debts (840+1580-2080) 340
Carriage outwards 4,160
Rental expenses 15,600
Wages & salaries 23,400
Insurance (1820-260) 1,560
General expenses (520-200) 320
Electricity & telephone (1300+200) 1,500
Interest (1300+260) 1,560
Depreciation – Furniture & fittings (5%x44200) 2,210
Depreciation – Office equipment [10% x (39000-2600)] 3,640
(55,330)
NET PROFIT 9,410
b. The statement of financial position as at 31 December 2019.

Mona Enterprise
Statement of Financial Position as at 31 December 2019
RM RM RM
NON-CURRENT ASSETS Cost Acc. Dep. NBV
Furniture & fittings 44,200 4,030 40,170
Office equipment 39,000 6,240 32,760
Total Non-Current Assets 72,930

CURRENT ASSETS
Closing inventory 10,400
Accounts Receivable (16,640 - 840) 15,800
(-) Allowance for Doubtful Debt (10%x15800) (1,580) 14,220
Cash (3,900 – 500) 3,400
Accrued commission revenue 1,040
Prepaid insurance expenses 260
Total Current Assets 29,320
102,250
Financed by:
Owner’s Equity
Opening Capital 61,360
(+) Net Profit 9,410
(-) Drawings (7,800+500) (8,300) 62,470
Ending Capital

CURRENT LIABILITIES
Accounts Payable 8,320
Bank overdraft 5,200
Accrued interest expenses 260
Total Current Liabilities 13,780

LONG TERM LIABILITY

Loan – Bank Simpanan Malaya 26,000
102,250