The following information relates to Teddington Tools who supply tools to the motor repair trade. The business had its year-end on 30 June 2006 when the following amounts were found in the accounts.

Selling and distribution costs	8,000
Equity capital at 1 July 2005	41,000
Inventory at 1 July 2005	17,000
Motor vehicles at cost	84,000
Motor vehicle depreciation at 1 July 2005	45,000
Revenue	248,500
Bank balance	4,000
Plant & machinery at cost	124,000
Plant & machinery depreciation at 1 July 2005	58,000
Long term loan	33,000
Purchases	164,000
Trade receivables	37,000
Administrative expenses	12,500
Trade payables	25,000

Further information:

• Inventory at 30 June 2006 cost 20,400.
• Administrative expenses includes electricity charges to 31 May 2006. The charge for the three months to 31 August 2006 is expected to be 900
• Selling expenses include 500 paid in advance for advertising which will appear in July 2006
• Trade receivables includes 400 which is not expected to be received
• Depreciation needs to be provided on:

Plant and machinery over 10 years on the straight-line basis with 4,000 residual value.

Motor vehicles at 30% on the straight-line basis.

Required

Prepare a statement of profit & loss and a statement of financial position for Teddington Tools

Explain the terms depreciation, non-current assets, prudence and accruals.