Kasozi Fred set up in business as a plumber a year ago, and he has asked you to act as his accountant. His instructions to you are in the form of the following letter. Dear Henry, I was pleased when you agreed to act as my accountant and look forward to your first visit to check my records. The proposed fee of Shs 250,000 p.a. is acceptable. I regret that the paperwork for the work done during the year is incomplete. I started my business on 1 January last, and put Shs 6,500,000 into a business bank account on that date. I brought my van into the firm at that time, and reckon that it was worth Shs 3,600,000 then. I think it will last another three years after the end of the first year of business use.

I have drawn Shs 90,000 per week from the business bank account during the year. In my trade it is difficult to take a holiday, but my wife managed to get away for a while. The travel agents bill for Shs 280,000 was paid out of the business account. I bought the lease of the yard and office for Shs 6,500,000. The lease has ten years to run, and the rent is only Shs 300,000 a year payable in advance on the anniversary of the date of purchase, which was 1 April. I borrowed Shs 4,000,000 on that day from Aunt Jane to help pay for the lease. I have agreed to pay her 10 per cent interest per annum, but have been too busy to do anything about this yet.

I was lucky enough to meet Miss Kisakye shortly before I set up on my own, and she has worked for me as an office organiser right from the start. She is paid a salary of Shs 3,000,000 p.a. All the bills for the year have been carefully preserved in a tool box, and we analysed them last week. The materials I have bought cost me Shs 9,600,000 but I reckon there was Shs 580,000 worth left in the yard on 31 December. I have not yet paid for them all yet, I think we owed Shs 714,000 to the suppliers on 31 December. I was surprised to see that I had spent Shs 4,800,000 on plumbing equipment, but it should last me five years or so. Electricity bills received up to 30 September came to Shs 1,122,000; but motor expenses were Shs 912,000 and general expenses

Shs 1,349,000 for the year. The insurance premium for the year to 31 March next was Shs 800,000. All these have been paid by cheque but Miss Kisakye has lost the rate demand. I expect the Local Authority will send a reminder soon since I have not yet paid. I seem to remember that rates came to Shs 180,000 for the year to 31 March next.

Miss Kisakye sent out bills to my customers for work done, but some of them are very slow to pay. Altogether the charges made were Shs 29,863,000, but only Shs 25,613,000 had been received by 31 December. Miss Kisakye thinks that 10 per cent of the remaining bills are not likely to be paid. Other customers for jobs too small to bill have paid Shs 3,418,000 in cash for work done, but I only managed to bank Shs 2,600,000 of this money. I used Shs 400,000 of the difference to pay the familys grocery bills, and Miss Kisakye used the rest for general expenses, except for Shs 123,000 which was left over in a drawer in the office on 31 December.

Kind regards, Yours sincerely, Kasozi Fred

You are required to draw up a statement of profit and loss account for the year ended 31 December, and a statement of financial position as at that date.