4.13 Paolo trades in promotional goods. His customers order items like mouse mats, biros, playing cards, golf balls, and so on, printed with their own logo. Paolo keeps an inventory of blank goods. When he receives an order from a customer he sends the plain items of inventory to a local printer who adds the customer’s logo and address details. The business is run from a shed in Paolo’s back garden at home. The shed is supplied with electricity;

the cost of the electricity is billed together with Paolo’s domestic supply. He estimates that 1/6 of the bill is attributable to electricity used in the shed. His electricity bills for the year to 31 March 2012 total £3072.

Apart from the electricity, Paolo’s records show the following items of revenue and expenses for the year:

£

Discounts allowed to customers 88 Travelling expenses 3 914 Revenue 118 242 Opening inventory at 1 April 2011 5 918 Cost of printing 17 291 Telephone 1 671 Mobile telephone call charges 419 Purchases 43 947 Discounts received from suppliers 133 Accountancy and tax advice 800 Office sundry expenses 977 Marketing 2 663 Interest received 204 Purchases returns 1 774 Closing inventory at 31 March 2012 4 261 Prepare Paolo’s income statement for the year ending 31 March 2012.