Ali Ibrahim is a sole trader and his financial year ends on 31 December every year. He provided the following balances on 31 December 2017.

V is 6, W is 7, X is 6, Y is 1 and Z is 4

Items	Amounts ($)
Accumulated depreciation - equipment	3,400 + 100 V
Accumulated depreciation - furnishing	4,700 + 100 W
Administrative expenses	2,880 60 W
Allowance for receivable	420 + 100 X
Bank overdraft	800 + 100 Z
Capital at 1 January 2017	22,000 + 20 X
Cash	1,240 + 100 V
Discount allowed	940 + 50 V
Discount received	1,160 + 50 V
Drawings	720 + 20 X
Equipment	58,000 + 100 Y
Furnishing	32,900 + 100 Z
General expense	2,340 10 Z
Insurance expense	540 + 60 W
Inventories at 1 January 2017	3,900 + 100 X
Marketing expenses	2,460 + 10 Z
Purchases	37,520 + 30 Y
Purchases return	860 + 40 Z
Rental expense	4,800 70 Y
Salaries and wages expense	13,700 + 70 Y
Sales return	680 + 40 Z
Sales revenue	132,220 + 30 Y
Trade payable	7,880 + 100 Y
Trade receivable	11,000 + 100 W

The following additional details are discovered after balances were extracted on 31 December 2017.

Equipment costing $(2,000 + 100 Z) with a scrap value of $(100 + 10 Y) was sold for $(200 + 10 X) cash during the year and this equipment was fully depreciated by the date of disposal. Relevant accounting entries were not yet made for the disposal of the equipment. It is the business policy to depreciate equipment using straight line method on cost at 10% per annum. Furniture is depreciated using reducing balance method of depreciation at 20% per annum. No furniture was bought or sold during the year.

The business pays fire insurance annually in advance on 1^st October each year. The annual fire insurance payment made on 1^st October 2016 was $(100 + 40 Z) and the payment made on 1^st October 2017 was $(100 + 40 Y) by cash. No accounting entry has been made for the latest fire insurance payment. The rent expense of the office is made quarterly in arrears on 1 February, 1 May, 1 August and 1 November each year in equal installments. The office rent payment is $(2,400 + 36 X) per year. The total rental expense for the year did not include the office rent for the last quarter of the year because it was still outstanding at the end of the year.

It was decided that debts of $(400 + 10 V) were to be written off because those customers declared bankrupt. A special allowance of 25% has to be made from a debt of $(1,000 + 20 W). It is the policy of the business to make a general allowance 10% for trade receivable after deducting any debts considered for special allowances and all irrecoverable debts.

On 1^st December 2017 the payable control account showed a credit balance of $(8,600 10 Z) and a small balance of $(20 X) on the debit side. Credit purchases during December 2017 were $(4,200 10 Y) and cash purchases were also made during the month. Payments made to suppliers, excluding cash purchases, and after deducting settlement discounts were $(3,800 10 V). Purchases returns during December 2017 were $(120 + 10 Z) and there was a contra entry with receivables control account for $(140 + 10 Y). The small balance on the debit side was fully settled during the month and there is no other entries missing in the payable control account, except for the amount of cash discounts received during December 2017 for early settlements of suppliers accounts, for which proper accounting entries were not yet made.

The bank statement received on 31 December 2017 showed bank charges and bank interest of $(160 + 10 Y) and $(180 + 10 Z) respectively, for which no accounting entries has been made in the cash book. It was also noted that unpresented cheques of $(40 + 2 V) and outstanding lodgments of $(60 + 3 W) were not recorded on the bank statement. Administrative expenses of $(80 + 4 X) were incorrectly debited to the marketing expenses account. Both sales and sales returns accounts were under casted by $(140 + 5 Z) each. General expenses paid $240 was correctly entered in the cashbook but incorrectly entered in the general expense account as $420.

Inventories value at 1^st December 2017 was at $(4,000 20 Y) which consist of 100 units. On 10^th December the business sold 30 units for $(80 + 1 V) each and on 15^th December another 40 units were sold for $(82 + 1 W) each. On 20^th December 90 units were purchased for $(50 Z) per unit and there were no more sales or purchases after that date until the year end. All the sales and purchases transactions were properly entered in the relevant accounts. The business uses AVCO (weighted average costing) method for inventory valuation.

REQUIREMENTS

Prepare Alis statement of profit for loss for the year ended 31 December 2017. (50 marks)

Prepare Alis statement of financial position as at 31 December 2017. (30 marks)

Identify any 5 accounting concepts and explain how a sole trader like Ali Ibrahim can apply these concepts in his business (in approximately 500 words). (20 marks)

(Total: 100 marks)