Question 2: Periodic:

An inexperienced accountant prepare the following condensed Income Statement for Ali Company.

Ali Company

Income Statement

For the Year ended December 31, 2002

Revenues:
Net Sales	Rs. 740000
Other Revenues	24000	Rs. 764000
Cost of Goods Sold

Purchases (Net)	Rs. 540000
Inventory Increase	15000
Cost of Goods Sold		555000
Gross Profit		Rs. 209000
Operating Expenses:
Selling Expenses	Rs. 104000
General and Administrative Expenses	69000	173000
Net Earnings		Rs. 36000

As an Experienced Competent, having own Eye and Skill and Knowledgeable accountant you reviews the statement and determines the following facts:

a. Net Sales Consists of Sales of Rs. 800000, less delivery expense on merchandise sold Rs. 30000 and sales returns and allowance Rs. 30000.

b. Other Revenues consists of purchases discount Rs. 16000 and Rent revenue Rs. 8000.

c. Net purchases include purchases Rs. 520000 and delivery cost on incoming merchandise Rs. 20000.

d. The inventory did increase Rs. 15000, which amounted to 25% of the beginning inventory.

e. Selling expenses consists of salespersons salaries R.s 80000, depreciation on accounting equipment Rs. 8000, advertising Rs. 10000, and sales commission Rs. 6000. The commission represents commissions paid. On December 31, Rs. 4000 of commissions have been earned by salespersons but have not been paid.

f. Administrative expenses consist of Office Salaries Rs. 27000, Owners drawings Rs. 4000, Utilities Rs. 12000, Interest expense Rs. 2000 and Rent Rs. 24000, which includes payments totaling Rs. 6000 for the first quarter of 2003.

Required:

a. Prepare correct detailed multiple step Income Statement.

b. Prepare correct condensed single step Income Statement.