Simon trades in soft furnishings from shop premises in the centre of a small town in northern
Question:
Simon trades in soft furnishings from shop premises in the centre of a small town in northern England. He provides basic summaries of his transactions for his accountant, Bernie, who prepares his final accounts and tax computation. The business year-end is 31 July.
Simon's income and expense transaction totals for the year ended 31 July 20X4, before any necessary year-end adjustments, are as follows:
£
Delivery expenses 2 490 Opening stock at 1.8.X3 38 888 Income from curtain-making service 6519 Costs of curtain-making service 2 797 Shop rental 18 750 Business rates 3510 Assistant's wages 22 379 Insurance 4478 Electricity 2 064 Travelling expenses 603 Sales 317 342 Telephone 1 035 Purchases 230133 Discounts received 377 Trade subscriptions 165 Charitable donations 500 Closing stock at 31.7.X4 39 501 Note the following additional information:
1. Of the £4478 included above for insurance, £501 relates to the period after 1 August 20X4.
2. Simon has two very trustworthy assistants working in the shop. As well as wages, he pays each of them an annual bonus of 0.5% of total sales (not including income from the curtain-making service). An accrual needs to be made for this item.
3. Electricity charges of £377 require accrual.
4. Bernie always makes an accrual for his own fees when drawing up Simon's accounts. He estimates that the fee required for the year ended 31 July 20X4 will be £800, 5. In conversation, Simon mentions that he has been having a lot of trouble with the occupants of the shop next door who regularly leave rubbish scattered on the forecourt that serves both shops. Simon has taken legal advice to see whether he can obtain a legal injunction, but he has not yet received a bill from the solicitor for work done. At Bernie's request Simon contacts the solicitor for an estimate of the fees at 31 July 20X4. The solicitor tells Simon that time charges for consultation and correspondence amount to about £350. Bernie and Simon agree that an accrual should be made for this amount.
Prepare a profit and loss account for Simon for the year ending 31 July 20X4 and calculate the totals for accruals and prepayments for Inclusion in the balance sheet at that date.
Step by Step Answer:
Business Accounting And Finance For Non Specialists
ISBN: 9781861528728
1st Edition
Authors: Catherine Gowthorpe