(a) The following trial balance was extracted from the books of M Jackson on 30 April 20X7. From it, and the note below it, prepare his trading and profit and loss account for the year ending 30 April 20X7, and a balance sheet as at that date

Closing stock amounted to £4,000. Depreciation is to be charged at rates of 10% on cost for Fixtures and Fittings and 25% on cost for Motor Vehicles. Bad debts of £800 are to be written-off.

(b) Michael has indicated that he thinks that the debtors that have been written-off will pay eventually. He is also querying why adjustments are made in the financial statements for bad debts and depreciation. Write a short note to him, making appropriate references to accounting concepts, outlining why these adjustments are made.

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Sales Purchases Stock 1 May 20X6 Carriage outwards Carriage inwards Returns inwards Returns outwards Salaries and wages Motor expenses Rent Sundry expenses Motor vehicles Fixtures and fittings Debtors Creditors Cash at bank Cash in hand Drawings Capital Dr m. 11,570 3,776 326 234 440 2,447 664 576 1,202 3,400 600 4,577 3,876 120 2,050 35,858 Cr £ 18,614 355 3,045 13,844 35,858