On completion of first year of business Imelda Folly has prepared her Statement of income for the year ended 31 December 2010 and her Statement of financial position as at that date as shown below:

At her request you reviewed the financial statements and have identified the following:

(a) £105,000 due from customers for sales made in the year has not been accounted for on the premise that these amounts were not received until 2011.

(b) Goods costing £45,000 remained unsold at year-end but have not been accounted for.

(c) Expenses remaining unpaid at year-end, but not accounted for, were salary £25,800, advertising £4,500 and one month’s rent agreed at £2,000 per month. The loan owed to Guy, Imelda’s husband, however, is interest free and repayable only when able.

(d) Insurance, paid on 1 April 2010, was for one year from that date.

(e) Included within sundry expenses are £2,800 paid as membership fees for Imelda’s Ladies Club and £1,400 paid as school fees for her son.

(f) Other than an equipment acquired on 1 July 2010 for £15,000, all furniture and equipments were acquired at commencement of business and are to be depreciated at 10% and 20% per annum, using the straight-line method.

Required:

Re-draft the financial statements of Imelda’s business in compliance with the accruals concept.

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Statement of income for year ended 31 December 2010 Sales Purchases Gross profit Staff salary Rent Advertising Telephone and postage Stationery Sundry expenses Insurance Gas and electricity Net profit for the year £ 328,400 (178,500) 149,900 (75,500) (22,000) (5,400) (1,500) (800) (11,200) (9,000) (3,000) 21,500 Statement of financial position as at 31 December 2010 Non-current assets at cost Furniture Equipment Current assets: Cash in hand Balance at bank Capital Profit for the year Loan from Mr Guy Folly £ 30,000 60,000 300 6,200 £ 50,000 21,500 4 90,000 6,500 96,500 £ 71,500 25,000 96,500