Natatsha’s friend, Sharleen, owns Sharleen Ahmed, a company specialising in low quality, high priced clothing. The material is purchased from Canada, made up into the finished garments in her own factory, and then sold in the local markets through stallholders.
During the year ended 30 June 2007 she made sales of Rs.260,040. Stock levels have remained relatively consistent over the years, the starting stock being Rs. 21,500 and the closing stock Rs. 22,500. She, unlike Natasha, is not very generous to her staff. This is reflected in the wages paid during the year of only Rs. 24,500. Business rates are a problem, since there is a dispute with the local council. She has paid a total of Rs.7,500 but there is a good chance that she will have to pay a further Rs.2,450. Postage and advertising is another problem area. For the imports from Canada it is necessary to pay all of the flight costs. These amounted to Rs. 5,200 over the year.

She delivers all of the invoices to the stallholders in person and is paid promptly, with the exception of one debtor who owes Rs.2,000 and who has been declared bankrupt. This amount is to be written-off. Advertising is minimal and is done in Natasha’s parlour: Rs.20 per week is paid to herin return for permission to pin leaflets on the softboard and an agreement that the she will place a leaflet every day on the coffee table in the reception area.

Insurance of Rs.3,500 has been paid, but Rs.650 of this relates to the year ending 30 June 2008. Electricity bills amounted to Rs. 2,900, but the bill for the final quarter is still outstanding and is expected to be approximately Rs.500. Purchases of cloth from Canada for the year are currently recorded as being Rs.65,000, but there is an outstanding bill of Rs.3,500 which is not yet included in that figure.

The factory and the machinery were bought at the same time and originally cost Rs. 400,000. Depreciation has accumulated to the sum of Rs.100,000. The current year charge is 5% on the reducing balance basis. The business had a computer which was purchased about three years ago and which Sharleen believes has about another two years of life left. It cost Rs. 4,000 and she uses

the straight line method of calculating the depreciation charge. The computer will be worthless at the end of that time.
Stationery charges amounted to Rs.1,350 and she had telephone bills of Rs.3,500, Rs.200 of which relates to July and August 2007. In the year ending 30 June 2006, she had paid Rs.150 which related to telephone charges in the year ending 30 June 2007.

Sahrleen has also paid Rs.5,000 for a top of the range digital home cinema system. She has enquired as to whether she can class this as a business expense as it has enabled her to unwind after long days at the office. Her salary for the year was Rs.50,000.
Cash in hand at 30 June 2007 was Rs.600 which he borrowed from her friend, Natasha, temporarily on 30 June when she realised that there was no cash available to pay any expenses.

Required:

1. Prepare a profit and loss account for the year ending 30 June 2007. 

2. Prepare a balance sheet at 30 June 2007 showing clearly Ms. Ahmed’s opening capital, working capital and the profit for the year