Question 1. Mr. and Mrs. Shine run a small private company selling children toys from China. Mr. Shine has asked you to prepare set of financial statement for the year ended 31 December 2020 as soon as possible as the previous accountant left the company at very short notice. Dr Cr E E 500 900 1,500 8,900 7.400 41,350 5,500 2,800 1,700 80,000 Audit and Accountancy Advertising Bank Creditors Long Term Bank Loan Debtors Directors remuneration Electricity Insurance Fixtures and Fittings At Cost Accumulated depreciation (at 1.1.2020) Motor Vehicle At Cost Accumulated depreciation (at 1.1.2020) Office expenses Ordinary 1 shares (issued and fully paid) Profit and loss account (at 1.1.2020) Purchases Rent and rates Sales Stock (at 11.2020) Wages and salaries Bank Interest 16,000 10,000 1,350 5,300 65,000 13,200 144,000 7,500 219,000 14,000 15,000 800 330,850 330,850 Additional Information: 1. Stock at 31 December 2020 valued at cost amounted to 20,000 2. Depreciation is to be provided on fixtures and fittings at 25% on cost 10% on reducing balance method for motor vehicle. 3. Provision is to be made for Rent and Rates for 250 4. Insurance paid in advance at 31 December 2020 amounted to 700 Required 1. Prepare Income statement for the year ended 31st December 2020 2. Prepare Balance Sheet as at 31st December2020 3. Discuss the Six accounting concepts, underlying the preparation of financial Statements. Question 2. The following statements of financial positions for the year ended 31st December 2019 and 2020 have been prepared for Happy Limited. Statement of financial positions at: 31.12.20 31.12.19 Non-current assets Plant and machinery at cost 35,000 35,000 Less: Depreciation (8,000) (6,000) 27,000 29,000 Investments at cost 20,000 Current assets Inventory 36,000 24,000 Trade receivables 22,000 11,000 Cash 1,000 58,000 36,000 85,000 85,000 Capital and reserves Ordinary share capital 40,000 40,000 Share premium account 5,000 5,000 Retained earnings 6,000 3,000 Shareholders' funds 51,000 48,000 Non-current liabilities Loans 9,000 Current liabilities Trade payables 29,000 28,000 Bank overdraft 5,000 34,000 85,000 85,000 Additional information: There were no purchases or sales of plant and machinery during the year. Required 1. Mrs Happy has asked you to prepare Happy Limited's statement of cash flows for the year ended 31st December 2020 2. Write a short memo to Mrs Happy explaining the findings of your statement of cash flow