CIMA CO2 Official Learning System - Fundamentals of Financial Accounting
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INCOMPLETE RECORDS, INCOME AND EXPENDITURE STATEMENTS
SOLUTIONS TO REVISION QUESTIONS C2
400
1.5
Subscriptions account
$ $
1/6/X7 Balance b/f 150 1/6/X7 Balance b/f 90
31/5/X8 Balance c/f 75 Bank 4,750
31/5/X8 I & E *
4,655 Bad debts 40
4,880 4,880
*Balancing fi gure
1.6 Answer: (D)
A receipts and payments account is a summary of the cash and bank transactions.
1.7
$
Received in year 12,450
Arrears at the beginning (50)
In advance at the beginning 75
In advance at the end (120)
Total to income and expenditure 12,355
1.8 Answer: (B)
Solution 2
●
This is a straightforward incomplete records question, involving the calculation of sev-
eral missing fi gures. The preparation of a ‘ workings ’ section, clearly labelled, is essential
in providing these fi gures.
●
This question also requires you to prepare a bank summary to determine the end-of-year
bank balance.
INCOMPLETE RECORDS, INCOME AND EXPEDITURE STATEMENTS
401
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Workings
$
Purchases 45,250
Opening payables 11,000
56,250
Closing payables (9,550)
Paid to payables 46,700
Sales 80,500
Opening receivables 16,200
96,700
Cheques received (78,900)
17,800
Closing receivables (17,300)
Cash discount 500
Local business tax
Paid 2,400
Accrued at start (400)
2,000
Prepaid at end 400
2,400
$ $
Bank summary
Opening balance 9,600
Receipts
Receivables 78,900
88,500
Payments
Payables 46,700
Wages 9,600
Motor expenses 2,250
General expenses 2,550
Loan interest 3,000
Drawings 4,000
Local business tax 2,400
(70,500)
Closing bank balance 18,000
Depreciation $
Motor vehicles (25% $8,000) 2,000
Fixtures (20% $7,500) 1,500
INCOMPLETE RECORDS, INCOME AND EXPENDITURE STATEMENTS
SOLUTIONS TO REVISION QUESTIONS C2
402
Income statement of Potter for the year ended 31 December 20X5
$ $
Sales 80,500
Less : cost of sales
Opening inventories 18,800
Purchases 45,250
64,050
Less : closing inventories (16,000)
(48,050)
Gross profi t 32,450
Less : expenses
Discounts allowed 500
Wages and salaries 9,600
Local business tax 1,600
Motor expenses 2,750
General expenses 2,550
Loan interest 3,000
Depreciation 3,500
(23,500)
Net profi t for the year 8,950
Statement of fi nancial position of Potter as at 31 December 20X5
Assets Carrying Amount ($)
Non-current assets
Land and buildings 80,000
Motor vehicles 6,000
Fixtures 6,000
92,000
Current assets
Inventories 16,000
Receivables 17,300
Prepayments 400
Bank 18,000
51,700
143,700
Capital and liabilities
Capital at 1 January 97,200
P r o fi t for the year 8,950
106,150
Less : drawings (4,000)
102,150
Long-term liabilities
Loan 30,000
Current liabilities
Payables 9,550
Accrued expenses
Motor expenses 500
Loan interest 1,500
11,550
143,700
INCOMPLETE RECORDS, INCOME AND EXPEDITURE STATEMENTS
403
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Solution 3
●
Prepare workings for missing fi gures.
●
Take care with subscriptions in advance and in arrears.
●
An income and expenditure statement is drawn up using the same principles as an
income statement. Revenue is earned during the period, irrespective of its receipt or
non-receipt, and expenditure includes expenses incurred during the period, irrespective
of payment.
Workings
Purchases $
Paid to payables 93,030
Less : opening payables (2,270)
90,760
Equipment
Carrying amount at 1 January 5,400
Proceeds of sale (2,400)
Loss on disposal 3,000
Subscriptions
Received during the year 4,120
In advance at the start of the year 480
In arrears at the end of the year 280
4,880
Less: in advance at the end of the year (350)
Income and expenditure statement 4,530
(a) Bar trading account of Lane Social Club for the year ended 31 December 20X5
$ $
Sales 139,050
Less : cost of sales
Opening inventories 9,500
Purchases 92,720
102,220
Less : closing inventories (8,350)
(93,870)
Gross profi t 45,180
Less : expenses
Barperson’s wages 9,500
Bar licence fees 2,000
(11,500)
Net profi t 33,680
INCOMPLETE RECORDS, INCOME AND EXPENDITURE STATEMENTS
SOLUTIONS TO REVISION QUESTIONS C2
404
(b) Income and expenditure statement of Long Lane Social Club for the year ended 31
December 20X5
$ $ $
Income
B a r p r o fi t 33,680
P r o fi t on refreshments
Sales 5,400
Purchases (2,890)
2,510
Subscriptions 4,530
Interest receivable 1,000
41,720
Expenditure
Loss on dance: ticket sales 1,880
Expenses 2,700
820
Cleaner’s wages 4,340
Secretary’s expenses 3,690
General expenses 2,090
Rent 3,520
Loss on sale of equipment 3,000
Depreciation 800
(18,260)
Surplus for the year 23,460
INCOMPLETE RECORDS, INCOME AND EXPEDITURE STATEMENTS
405
FUNDAMENTALS OF FINANCIAL ACCOUNTING
(c) Statement of fi nancial position of Long Lane Social Club as at 31 December 20X5
Assets Cost ($) Accumulated dep’n ($) Carrying amount ($)
Non-current assets
Premises 105,000 – 105,000
Equipment 8,000 (800) 7,200
113,000 (800) 112,200
Current assets
Bar inventories 8,350
Subscriptions in arrears 280
Rent prepaid 1,100
Bank deposit 17,000
Bank 7,290
34,020
146,220
Accumulated fund and liabilities
Accumulated fund
Balance at 1 January 20X5 (see note i) 120,450
Surplus for the year 23,460
143,910
Current liabilities
Payables 1,960
Subscriptions in advance 350
2,310
146,220
Note :
(i) The opening accumulated fund can be taken as the balancing fi gure, as the question
does not specifi cally ask for a separate calculation of this. However, if you wish to check
the accuracy of the fi gure, then an opening statement of affairs can be produced.
INCOMPLETE RECORDS, INCOME AND EXPENDITURE STATEMENTS
SOLUTIONS TO REVISION QUESTIONS C2
406
Statement of affairs of Long Lane Social Club as at 1 January 20X5
$ $
Assets
Premises 105,000
Equipment 5,400
Bar inventories 9,500
Rent prepaid 1,000
Bank 2,300
123,200
Less : liabilities
Payables 2,270
Subscriptions in advance 480
(2,750)
Accumulated fund on 1 January 20X5 120,450
Solution 4
●
Identify the capital and revenue receipts/payments.
●
Adjust the receipts and payments for the effects the notes produce.
●
Prepare the fi nancial statements in good format.
(a) (i) Subscriptions
$
Subscriptions received for the year 12,600
Subscriptions accrued for the year 1,500
Total subscriptions for the year 14,100
Subscriptions for the 6 months 7,050
(ii) Profi t from the sale of club ties
$ $
Sales of ties 373
Purchases of ties 450
Less : closing inventories (180)
(270)
P r o fi t 103
(iii) Life membership fees
$
Amounts received 4,200
Annual equivalent 420
Amount to include in I & E 210
INCOMPLETE RECORDS, INCOME AND EXPEDITURE STATEMENTS
407
FUNDAMENTALS OF FINANCIAL ACCOUNTING
(iv) Depreciation of equipment
$
Cost 4,080
Annual depreciation 806
Amount to include in I & E 403
(b) Income and expenditure statement of HB Tennis Club for the 6 months ended 30
September 20X0
$ $
Income
Subscriptions 7,050
Income from tournaments (465 132) 333
Interest received on bank deposit 43
P r o fi t from sale of club ties 103
Life membership (4 $1,050 / 10 6 / 12) 210
7,739
Expenditure
Groundsperson’s wages ($4,520 $40) 4,560
Rent ($636 $68) 568
Heat and light ($674 $53) 727
Postage and stationery ($41 $12) 53
Court maintenance 1,000
Depreciation of equipment 403
(7,311)
Excess of income over expenditure 428
Solution 5
●
The bar trading account requires a calculation of bar purchases.
●
A separate ‘ surplus on theatre productions ’ calculation is required.
●
The theatre productions defi cit includes depreciation of the theatre equipment (but not
the cost of the equipment, as this is a capital item). The value of the theatre equipment
has gone up during the year owing to the new purchases, but has then fallen to take
account of depreciation.
●
The income and expenditure statement follows the normal accounting rules involved
in the preparation of income statements, that is, it should include the income earned
and the expenses consumed during the period, with relevant adjustments for accruals
and prepayments.
●
Grants and subsidies are to be treated as revenue receipts on the assumption that they
were received in respect of revenue expenditure.
INCOMPLETE RECORDS, INCOME AND EXPENDITURE STATEMENTS
SOLUTIONS TO REVISION QUESTIONS C2
408
(a) Subscriptions
$ $
Subscriptions in arrears b/f 350 Subscriptions in advance b/f 160
Subscriptions in advance c/f 60 Receipts 4,460
Income and expenditure 4,670 Subscriptions in arrears c/f 460
5,080 5,080
(b) (i) Bar purchases
$ $
Payments to suppliers 14,700 Owing at 1.6.X1 1,300
Owing at 31.5.X2 1,650 Purchases 15,050
16,350 16,350
(ii) Bar trading account for the year ended 31 May 20X2
$ $
Sales
Less : cost of goods sold 25,900
Inventories at the start of the year 2,670
Purchases 15,050
17,720
Inventories at the end of the year (2,330)
(15,390)
Gross Profi t 10,510
Less :
Bar expenses 4,180
Depreciation (14,500 11,500) 3,000
(7,180)
Bar profi t 3,330
(c) (i) Productions expenses
$ $
Payments 18,800 Owing at 1.6X1 2,490
Owing at 31.5.X2 1,540 Purchases 17,850
20,340 20,340
(ii) Depreciation of theatre equipment
$ $
Value at 1.6.X1 35,000 Value at 31.5.X2 46,000
Purchases 15,100 Depreciation 4,100
50,100 50,100
INCOMPLETE RECORDS, INCOME AND EXPEDITURE STATEMENTS
409
FUNDAMENTALS OF FINANCIAL ACCOUNTING
(iii) Productions trading account for the year ended 31 May 20X2
$ $
Ticket sales 17,320
Less : cost of productions
Productions expenses 17,850
Fees of guest artists 900
Depreciation of theatre equipment 4,100
(22,850)
D e fi cit on productions (5,530)
(d) (i) Stationery, publicity and printing
$ $
Prepaid at 31.5.X1 400 Prepaid at 31.5.X2 300
Payments 1,100 Income and expenditure 1,200
1,500 1,500
(ii) Income and expenditure statement Questing Theatre Club for the year ended 31
May 20X2
$ $
Income
Member subscriptions 4,670
Donations 500
Surplus on bar 3,330
Grants and subsidies * 13,800
22,300
Expenditure
D e fi cit on productions 5,530
Secretarial expenses 550
Rent of premises 1,990
Stationery, printing and publicity 1,200
Other expenses 4,820
(14,090)
Surplus 8,210
*Grants and subsides have been treated as revenue receipts.