Laura was made redundant on 1 July 2015 and received £50,000 in redundancy pay. With this money, she opened a business bank account and set up a small building company undertaking household and small industrial construction work. She commenced her business on 1 September 2015 and she has now reached her year end of 31 August 2016. She has produced a summary of payments and receipts into her business bank account along with additional information that she thinks will be useful in preparing the income statement and statement of financial position for her first year of trading. The details she has presented you with are as follows:

1. Laura’s customers usually pay cash at the end of each job. Cash received and banked totals up to £112,000. However, her small industrial clients keep her waiting for payment. She invoiced her small industrial customers £48,000 during the year, but she had only collected £36,000 of this amount by 31 August 2016.

2. Laura buys her construction materials on credit from a local wholesaler. Her total spending on materials this year has been £45,000 of which she had paid £38,000 by 31 August 2016. Her annual trading summary from the wholesaler received on 5 September 2016 tells her that she has qualified for a bulk purchase discount of £1,000, which she can deduct from her next payment in September 2016.

3. Since 31 August 2016, a small industrial customer has gone into liquidation, owing Laura £2,500. The liquidator has told Laura that no payment towards this trade receivable will be made. This liquidation of her customer has made Laura think about the solvency of her other trade receivables: she decides that she would like to create a doubtful debt provision of 10% of her remaining trade receivables.

4. Laura bought a second-hand van for £6,000 on 1 September 2015. She reckons this van will last for three years before she has to replace it. She anticipates that the trade-in value of this van will be £600 in three years’ time. Laura expects the van to do 5,000 miles each year.

5. Van running expenses and insurance for the year amounted to £4,000. All of these expenses were paid from the business bank account. There were no outstanding or prepaid van running expenses at 31 August 2016.

6. On 1 September 2015, Laura paid £5,000 for various items of second-hand construction equipment. These assets should last four years and fetch £60 as scrap when they are replaced. Laura expects to make the same use of these assets in each oft he four years.

7. Two part-time helpers were employed for 13 weeks during June, July and August 2016. By 31 August 2016, Laura had paid both these helpers 12 weeks of their wages amounting to £9,600 out of the business bank account.

8. Comprehensive business insurance was taken out on 1 September 2015. As a new business customer, Laura took advantage of the discount scheme to pay £1,800 for 18 months cover.

9. Laura counted up and valued her stock of building materials at 31 August 2016. She valued all these items at a cost to her of £4,500.

10. £400 in bank charges was deducted from her bank account during the year. The bank manager has told her that accrued charges to the end of August 2016 amount to an additional £75.

11. Laura's bank account was overdrawn in the early part of her first year of trading. The bank charged her £200 interest on this overdraft. Since then, her bank account has been in credit and she has earned £250 in interest up to 31 July 2016. The bank manager has told her that in August 2016 her interest receivables a further £50 and this will be added to her account in October 2016.

12. Laura withdrew £2,500 each month from the bank for personal expenses. As she had so much cash in the bank in August 2016, on 31 August 2016 she used £90,000 from her business bank account to repay half of the mortgage on her house.

Required 

1. Prepare Laura’s bank account for the year ended 31 August 2016.
2. Prepare a simplified income statement for Laura’s business for the year to 31 August 2016 and a statement of financial position at that date.