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Parvez, the promoter of Radiance Architect, had sought your help for the preparation of the financial statements on the basis of the information set out
Parvez, the promoter of Radiance Architect, had sought your help for the preparation of the financial statements on the basis of the information set out below. He had to also pay a tax of on the profit calculated.
RADIANCE ARCHITECT
In January Mr Parvez Alam did set himself up as a consulting architect after retiring from a real estate company. While his primary interest was in building institutional complexes, he had advised some wealthy clients on designing their residential homes. Radiance was doing pretty well under the leadership of Parvez but how well was difficult to define in absence of financial statements. Parvez was somewhat allergic to accounting as he felt that it stifled creative and innovative abilities.
In early January Parvez approached his banker to extend a line of credit to sustain the business growth. The banker asked him to submit his tax return along with the required financial statements, ie a profit and loss statement in respect of his operations as well as a balance sheet as at December Parvez felt that some attempt had to be made to put together a set of accounts to satisfy the banker and tax authorities. He instructed Miss Joshi, the young lady who acted as his secretary to collect all the necessary details relating to billing made, cash received, expenses incurred, assets held and outstanding amounts due to suppliers and others relevant to the period.
Miss Joshi assembled the following data:
Business assets consisted primarily of office furniture and equipment which were acquired on July It was decided that these assets should be depreciated at the rate of per year on written down value. The acquisition cost of these assets was Rs
There were shares and debentures worth Rs at the beginning of the accounting period.
Cash balance and inventory at the end of the day on December were Rs and Rs respectively
The office records showed that the following cash had been received during the year ended December
a
Collections relating to bills raised on clients
b
Dividends and interest received from stocks and debentures
Parvez was rather happy about the fact that while actual billings during the December period were Rs while the cash received from clients was Rs Miss Joshi also informed him that some of the clients, who were personal friends, were yet to pay the fees for the bills raised in The estimates of such uncollectible amounts were Rs in respect of billings pertaining to periods prior to
A thorough analysis of the stubs of used cheque books disclosed that the following payments were made during that period:
Items
Amount in RS
Salaries of architects
Supplies used for prototypes
Rent for Office Premises
Professional association Fees
Shares purchased
Amount withdrawn by Parvez for personal expenses
Selling, & Administrative Expenses
Total
Ms Joshi found that the following bills were outstanding at the end of and respectively:
Outstanding on December,
Outstanding on December,
Salaries of architects
Supplies used for prototypes
Rent for Office Premises
Selling, & Administrative Expenses
Total
Ms Joshi also informed that the inventory of supplies material as at the end of December was Rs
Prepare balance sheet.
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