LESSON TEN – Illustration

The following trial balance was extracted from books of T. Kamau, a sole trader as at 31 st Dec
2013.
Sh. Dr. Sh. Cr.
Capital 5,920,000
Drawings 1,200,000
Trade debtors 1,821,400
Trade creditors 2,169,000
Sales 8,905,600
Purchases 4,188,400
Stock 1st Jan 2013 2,533,300
Sales returns 144,700
Purchases returns 218,800
Cash at hand 56,800
Balance at bank 1,056,400
Warehouse expenses 640,000
Discounts allowed 90,200
Discounts received 170,400
Office salaries 600,000
Office lighting 188,800
Rates 108,200
Motor vehicle (cost) 1,280,000
Freehold premises at cost 2,600,000
Fixtures and fittings at cost 576,000
General expenses 142,400
Insurance 28,000
Provision for bad debts 50,000
Motor vehicle expenses 150,400
Bad debts written off 28,800
17,433,800 17,433,800

Additional information
1) Stock as at 31st Dec 2013 was valued at Sh. 1,760,000
2) Depreciation on fixtures and fittings and motor vehicle is provided at 5% and 10% p.a on
cost respectively.
3) Included in sales are goods for Sh. 13,000 ordered by Mr. Patel in the month of April. He
has never communicated though the goods have been included in the closing stock.
4) Rates prepaid as at 31st Dec 2013 amounted to Sh. 25,600.
5) Unexpired insurance as at 31st Dec 2013 was Sh. 4,000.
6) Provision for bad debts as at 31st Dec 2013 is to be made at 2.5 % of net trade debtors.
Required
a) Trading and profit and loss account for year ended 31st Dec 2013
b) Balance sheet as at 31st Dec 2013.

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 T. KAMAU SOLE TRADER
TRADING, PROFIT & LOSS A/C
FOR THE YEAR ENDING 31ST DECEMBER 2013
Sh. Sh. Sh.
Sales 8,905,600
Less Sales Returns (144,700)
Less unrealized sales (13,000)
8,747,900
Less: COST OF SALES
Opening stock 2,533,300
Add Purchases 4,188,400
Less Purchases Returns (218,800)
Goods available for sale 3,969,600
Less Closing stock (1,760,000)
(4,742,900)
Gross Profit 4,005,000
Add Discount received 170,400
Add Reduction of provision 4,790
4,180,190
EXPENSES
Depreciation: Motor vehicle 128,000
: Fixtures and fittings 28,800
156,800
Rates 108,200
Less Prepaid Rates (25,600)
82,600
Insurance 28,000
Less unexpired insurance (4,000)
24,000
Warehouse expenses 640,000
Discount allowed 90,200
Office salaries 600,000
Office lighting 188,800
General expense 142,400
Motor vehicle expenses 150,400
Bad debts written off 28,800
(2,104,000)
Net Profit 2,076,190

Workings
Net debtors = Sh. 1,821,400 – Sh. 13,000 = Sh. 1,808,400 Motor vehicle Dep. 10% of 1,280,000 =
Provision of bad debts = 1,808,400 x 2.5% = Sh. 45,210 Sh. 1,280,000
Decrease in provision = Sh. 50,000 – Sh. 45,210 = Sh. 4,790 Furniture and fittings Dep. 5% of 576,000
= Sh. 28,800

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 T. KAMAU SOLE TRADER
BALANCE SHEET
AS AT 31 DECEMBER 2013
Sh. Sh. Sh.
NON CURRENT ASSETS COST ACC DEP. N.B.V
Freehold premises 2,600,000 - 2,600,000
Motor Vehicle 1,280,000 (128,000) 1,152,000
Fixture and fittings 576,000 (28,800) 547,200
4,456,000 (156,800) 4,299,200
CURRENT ASSETS
Stock 1,760,000
Debtors 1,808,400
Less Provision (45,210)
1,763,190
Prepayments: Rent 25,600
Insurance 4,000
Bank 1,056,400
Cash 56,800
Total Currents Assets 4,665,990
TOTAL ASSETS 8,965,190

FINANCED BY
Capital 5,920,000
Add Net profit 2,076,190
Less Drawings (1,200,000)
6,796,190
CURRENT LIABILITIES
Creditors 2,169,000
2,169,000
8,965,190

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