GROUT INDUSTRIES COMPANY LIMITED

Henry is a new accounting recruit at Green Fields & Co Certified Public Accountants. He has been undergoing a rigorous training and orientation exercise at the firm. A client of the firm, Grout Industries Company Limited (GICL) whose Accountant left abruptly for greener pastures, has brought a list of account balances to aid in the preparation of the final accounts of the Company. This assignment has been referred to Henry to test his financial accounting skills.

The list of account balances as at 31^st December 2021 is shown below.

Particulars Amount in UGX

Revenue 31,600,000

Purchases 18,000,000

Opening inventory (1^st January 2021) 4,500,000

Storage costs 850,000

Sales persons Salaries and commissions 200,000

Administrative Salaries 3,000,000

General Administrative expenses 580,000

General distribution expenses 490,000

Loan interest paid 100,000

Dividends: interim dividend paid 40,000

Purchase returns 900,000

Purchases Discount 600,000

Non-current assets: cost 18,000,000

Accumulated Depreciation 1 Jan. 2021 3,900,000

Trade accounts Receivable 6,900,000

Accounts Payable 3,800,000

Balance at bank 2,080,000

10% loan (repayable 2025) 12,000,000

Retained earnings 15,240,000

The following information is also available

(i) Inventory as at 31^st December 2021 amounted to shs 3,000,000.

(11) A review of the trade accounts receivable total of shs. 6,900,000 shows that debts totaling 400,000/= should be written as bad debts.

Required:

Q.1.

• Taking the role of Henry and using the data provided, show how you would explain the performance of the company for the year ended 31^st Dec. 2021?
• Discuss the reasons various stakeholders may be interested in the accounts of Grout Industries Company Limited showing, for each of them, theirinformation needs?
• Explain, how in your view 'you would treat a bad debt that had been written off and the debtor resurfaces and pays towards the end of accounting?