The accountant of Fiddles PLC has begun preparing financial statements but the work is not yet complete. At this stage the items included in the trial balance are as follows:

Notes (i ) to (vii) below are to be taken into account:

(i) The debtors control account figure, which is used in the trial balance, does not agree with the total of the debtors ledger. A contra of £5,000 has been entered correctly in the individual ledger accounts but has been entered on the wrong side of both control accounts. 

A batch total of sales of £12,345 had been entered in the double entry system as £13,345, although individual ledger account entries for these sales were correct. The balance of £4,000 on sales returns account has inadvertently been omitted from the trial balance, though correctly entered in the ledger records.

(ii) A standing order received from a regular customer for £2,000, and bank charges of £1,000, have been completely omitted from the records.

(iii) A debtor for £1,000 is to be written off. The provision for doubtful debts balance is to be adjusted to 1% of debtors.

(iv) The opening stock figure had been overstated by £1,000 and the closing stock figure had been understated by £2,000.

(v) Any remaining balance on suspense account should be treated as purchases if a debit balance and as sales if a credit balance.

(vi) The debentures were issued three months before the year end. No entries have been made as regards interest.

(vii) A dividend of 10% of share capital is to be proposed.

Required:

(a) Prepare journal entries to cover items in notes (i) to (v) above. You are NOT to open any new accounts and may use only those accounts included in the trial balance as given.

(b) Prepare financial statements for internal use in good order within the limits of the available information. For presentation purposes all the items arising from notes (i) to (vii) above should be regarded as material.

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Land Buildings Plant and machinery Depreciation provision Share capital Profit and loss balance brought forward Debtors Creditors Stock Operating profit Debentures (16%) Provision for doubtful debts Bank balance (asset) Suspense £000 100 120 170 120 100 200 200 110 190 80 180 3 12 1