The trial balance of Norr Ltd at 31 December 20X9 is as follows:

Additional information
1. During the year a motor vehicle purchased on 31 March 20X6 for £8,000 was sold for £3,000. The sale proceeds were debited to the bank account and credited to the sales account, and no other entries have been made in the financial statements relating to this transaction.
2. Depreciation has not yet been provided for the year. The following rates are applied on the straight-line basis, with the assumption of no residual value:

3. Inventory at 31 December 20X9 amounted to £45,000.

4. Rates paid in advance amount to £400. Insurance includes £200 paid in advance. An electricity bill covering the quarter to 31 December 20X9 and amounting to £320 was not received until February 20Y0. It is estimated that the audit fee for 20X9 will be £1,500. An accrual also needs to be made in relation to debenture interest.
5. A general allowance for irrecoverable receivables of 4 per cent of trade receivables is to be carried forward.
6. The directors propose a dividend of £10,000.

Required
a. Prepare a statement of comprehensive income and statement of financial position on the basis of the above information.
b. Explain the meaning of the terms ‘provision’ and ‘reserve’, giving one example of each from the statement of financial position you have prepared.

Transcribed Image Text:

Equity shares of £1- fully paid Purchases Retained profit Freehold property-cost Fixtures-cost Fixtures-accumulated depreciation Rates Motor vehicles - cost Motor vehicles-accumulated depreciation Insurance Inventories Trade receivables Trade payables Sales revenue Bank 12% debentures Debenture interest Wages and salaries Heat and light Professional fees General expenses Motor expenses Allowance for irrecoverable receivables Irrecoverable receivables Debit £ 220,000 80,000 15,000 3,000 28,000 2,000 40,000 30,000 12,100 2,400 34,000 4,100 3,900 1,200 2,000 300 478,000 Credit £ 50,000 30,000 9,000 14,000 24,000 310,000 40,000 1,000 478,000