CASE STUDY: THOMAS ENTERPRISE Thomas Enterprise which sells electrical products including washing machines, air conditioners, water heaters and televisions. Thomas is the sole owner of the business. Thomas has no knowledge of double entry bookkeeping. Although he has kept minimum records of his transactions, he records everything correctly. As such, he has come to you, an accountant in a small accounting company, to seek help in preparing his accounts as well as providing him with any accounting advice that is necessary for the business to run smoothly. The following balances were extracted from the books of Thomas Enterprise as at 31 December 2020. Debit Credit List of Accounts (RM) (RM) 350 1,000 9,600 800 4.800 78,000 8,460 8,280 10,200 9,000 580 150 570 Insurance on purchase Bank Charges Rental expense Stationeries Carriage expenses Salaries Utilities General Expenses Advertising Expenses Commission received Drawings Allowances for Doubtful Debt as at 1 January 2020 Sales Return Inwards/Outwards Discounts Allowed Received Capital Inventories as at 1 January 2020 Freehold Land Motor Vehicles Office Equipment Accumulated Depreciation as at 1 January 2020 Motor Vehicles Office Equipment 5% Fixed Deposit Bank Cash Accounts Receivables Accounts Payables 10% Loan from Bank Purchases 610 265.000 800 1,960 363,600 22,500 250,000 96.000 25,000 38,400 5.890 50,000 55,800 2,470 21,500 36,400 40,000 115,600 761,660 761,660 Following a discussion with Thomas the following points have come to light. These items have not been included as he was not sure how to record them. 1. 25% of carriage expenses were carriage inwards and the remainder were carriage outwards expenses. 2. Depreciation is to be provided as follows: Motor vehicles 10% on straight line method Office equipment 7% on reducing balance method 3. The following adjustments are to be considered for the period: Prepayments RM Accruals Commission 2,000 Salaries received Stationeries 100 Utilities RM 2,500 500 4. The owner took cash RM1,000 and goods worth RM8,000 for personal use 5. The loan from Bank FB was taken on 1 January 2020. No interest has been paid on this loan at the end of accounting period. 6. Allowances for Doubtful Debt were to be adjusted to RM645. 7. The Fixed Deposit account was opened on 1 July 2020 and interest is at 5% per annum. No interest has been received during the year. 8. Inventories as at 31 December 2020 were valued at RM28,500 Required: (a) Prepare the Statement of Profit or Loss for the year ended 31 December 2020. (11 marks) (b) Prepare the Statement of Financial Position as at 31 December clearly showing Thomas Enterprise's opening capital, working capital (net current assets) and the net profit for the year. (9 marks) (c) Thomas has heard about accounting terms assets, liabilities, equity, expenses and income. However, Thomas is not sure what these terms mean and what are the differences between these terms. Write a report, using a fictitious name and address to Thomas to answer his query. In the report, you are required to explain with examples all the five terms mention. (10 marks) [Total: 30 Marks] CASE STUDY: THOMAS ENTERPRISE Thomas Enterprise which sells electrical products including washing machines, air conditioners, water heaters and televisions. Thomas is the sole owner of the business. Thomas has no knowledge of double entry bookkeeping. Although he has kept minimum records of his transactions, he records everything correctly. As such, he has come to you, an accountant in a small accounting company, to seek help in preparing his accounts as well as providing him with any accounting advice that is necessary for the business to run smoothly. The following balances were extracted from the books of Thomas Enterprise as at 31 December 2020. Debit Credit List of Accounts (RM) (RM) 350 1,000 9,600 800 4.800 78,000 8,460 8,280 10,200 9,000 580 150 570 Insurance on purchase Bank Charges Rental expense Stationeries Carriage expenses Salaries Utilities General Expenses Advertising Expenses Commission received Drawings Allowances for Doubtful Debt as at 1 January 2020 Sales Return Inwards/Outwards Discounts Allowed Received Capital Inventories as at 1 January 2020 Freehold Land Motor Vehicles Office Equipment Accumulated Depreciation as at 1 January 2020 Motor Vehicles Office Equipment 5% Fixed Deposit Bank Cash Accounts Receivables Accounts Payables 10% Loan from Bank Purchases 610 265.000 800 1,960 363,600 22,500 250,000 96.000 25,000 38,400 5.890 50,000 55,800 2,470 21,500 36,400 40,000 115,600 761,660 761,660 Following a discussion with Thomas the following points have come to light. These items have not been included as he was not sure how to record them. 1. 25% of carriage expenses were carriage inwards and the remainder were carriage outwards expenses. 2. Depreciation is to be provided as follows: Motor vehicles 10% on straight line method Office equipment 7% on reducing balance method 3. The following adjustments are to be considered for the period: Prepayments RM Accruals Commission 2,000 Salaries received Stationeries 100 Utilities RM 2,500 500 4. The owner took cash RM1,000 and goods worth RM8,000 for personal use 5. The loan from Bank FB was taken on 1 January 2020. No interest has been paid on this loan at the end of accounting period. 6. Allowances for Doubtful Debt were to be adjusted to RM645. 7. The Fixed Deposit account was opened on 1 July 2020 and interest is at 5% per annum. No interest has been received during the year. 8. Inventories as at 31 December 2020 were valued at RM28,500 Required: (a) Prepare the Statement of Profit or Loss for the year ended 31 December 2020. (11 marks) (b) Prepare the Statement of Financial Position as at 31 December clearly showing Thomas Enterprise's opening capital, working capital (net current assets) and the net profit for the year. (9 marks) (c) Thomas has heard about accounting terms assets, liabilities, equity, expenses and income. However, Thomas is not sure what these terms mean and what are the differences between these terms. Write a report, using a fictitious name and address to Thomas to answer his query. In the report, you are required to explain with examples all the five terms mention. (10 marks) [Total: 30 Marks]