QUESTION ONE Donald, a proprietor of a grocery store has not previously maintained proper record. He informs you that this year his bankers have insisted on a proper set of accounts. Donald supplies you with draft trading results for the year ended 30 June 2020 which are as follows: 5,465,000 Payment for goods Payment for expenses Profits 4,747,500 Takings 565,000 152,500 5,465,000 5,465,000 Donald instructs you to examine his records and prepare accounts. From your examination of the records and interview with your client, you ascertain the following information: 1. The takings are kept in a drawer under the counter, at the end of each day the cash is counted and recorded on a scrap of paper, at irregular intervals Mrs. Donald transcribes the figures into a notebook; a batch of slips of paper was inadvertently destroyed before the figures had been written into the notebook, but Mr. and Mrs. Donald carefully estimated their takings for that period, and the estimated figure is included in the total of Sh. 5,465,000 2. Mr. Donald involved himself in betting for 30 weeks of the year, spending Sh. 500 per week with cash taken from the drawer. His winnings totaled Sh. 29,500. 3. The following balances are ascertained as correct: 30 June 2020 Sh '000 Sh '000' Cash in hand 43,500 22,500 Balance at bank 109,500 78,000 Accounts Receivable (debtors) 245,500 229,000 2019 Accounts payables (creditors) Inventories at cost 121,500 139,500 950,000 975,000 4. Debtors totaling Sh. 178,000 were abandoned during the year as bad debts while the takings included Sh 12,500 recovered in respect of an old debt abandoned in the previous year. 5. Mr. Donald rents the shop building and use it partly for living accommodation at Sh. 1,500 per week for 52 weeks in a year, the rent is included in expenses of Sh 565,000. The living accommodation comprises one-third of the building. 6. The total expenses also include: Sh. 17,500 running expenses of Donald's private car; Sh. 30,000 for exterior decoration of the whole premises, Sh. 80,000 for alterations to the premises to enlarge the storage accommodation. 7. Mr. Donald takes Sh. 5,000 per week from the business for his wife's personal expenses and Sh. 750 per week for his personal entertainment 8. During the year, Mr. Donald bought a secondhand car (not for use in the business) from a friend, the price agreed was Sh. 175,000, but as the friend owed Mr. Donald Sh. 33,500 for goods supplied from the business, the difference was settled by cheque. 9. An insurance policy for Mr. Donald's life matured and realized Sh. 320,500. 10. Mr. Donald cashed a cheque for Sh. 50,000 for a friend, the cheque was dishonored and the friend is repaying the Sh. 50,000 by installments. He had paid Sh. 20,000 by 30 June 2020. 11. Other private payments by cheque totaled Sh. 48,000 plus a further sum of Sh. 55,000 for income tax 12. You are to provide Sh. 21,000 for accountancy fees. N.B. All receipts and payments are made through his business bank account. Required: a) Statement of affairs at 30 June 2019. b) Statement of profit and loss for the year ended 30 June 2020. c) Statement of position for the business at 30 June 2020. QUESTION ONE Donald, a proprietor of a grocery store has not previously maintained proper record. He informs you that this year his bankers have insisted on a proper set of accounts. Donald supplies you with draft trading results for the year ended 30 June 2020 which are as follows: 5,465,000 Payment for goods Payment for expenses Profits 4,747,500 Takings 565,000 152,500 5,465,000 5,465,000 Donald instructs you to examine his records and prepare accounts. From your examination of the records and interview with your client, you ascertain the following information: 1. The takings are kept in a drawer under the counter, at the end of each day the cash is counted and recorded on a scrap of paper, at irregular intervals Mrs. Donald transcribes the figures into a notebook; a batch of slips of paper was inadvertently destroyed before the figures had been written into the notebook, but Mr. and Mrs. Donald carefully estimated their takings for that period, and the estimated figure is included in the total of Sh. 5,465,000 2. Mr. Donald involved himself in betting for 30 weeks of the year, spending Sh. 500 per week with cash taken from the drawer. His winnings totaled Sh. 29,500. 3. The following balances are ascertained as correct: 30 June 2020 Sh '000 Sh '000' Cash in hand 43,500 22,500 Balance at bank 109,500 78,000 Accounts Receivable (debtors) 245,500 229,000 2019 Accounts payables (creditors) Inventories at cost 121,500 139,500 950,000 975,000 4. Debtors totaling Sh. 178,000 were abandoned during the year as bad debts while the takings included Sh 12,500 recovered in respect of an old debt abandoned in the previous year. 5. Mr. Donald rents the shop building and use it partly for living accommodation at Sh. 1,500 per week for 52 weeks in a year, the rent is included in expenses of Sh 565,000. The living accommodation comprises one-third of the building. 6. The total expenses also include: Sh. 17,500 running expenses of Donald's private car; Sh. 30,000 for exterior decoration of the whole premises, Sh. 80,000 for alterations to the premises to enlarge the storage accommodation. 7. Mr. Donald takes Sh. 5,000 per week from the business for his wife's personal expenses and Sh. 750 per week for his personal entertainment 8. During the year, Mr. Donald bought a secondhand car (not for use in the business) from a friend, the price agreed was Sh. 175,000, but as the friend owed Mr. Donald Sh. 33,500 for goods supplied from the business, the difference was settled by cheque. 9. An insurance policy for Mr. Donald's life matured and realized Sh. 320,500. 10. Mr. Donald cashed a cheque for Sh. 50,000 for a friend, the cheque was dishonored and the friend is repaying the Sh. 50,000 by installments. He had paid Sh. 20,000 by 30 June 2020. 11. Other private payments by cheque totaled Sh. 48,000 plus a further sum of Sh. 55,000 for income tax 12. You are to provide Sh. 21,000 for accountancy fees. N.B. All receipts and payments are made through his business bank account. Required: a) Statement of affairs at 30 June 2019. b) Statement of profit and loss for the year ended 30 June 2020. c) Statement of position for the business at 30 June 2020