The trial balance of Norr Ltd at 31 December 20X2 appeared as follows: Additional information 1. During the year a motor vehicle purchased on 31 March 20W9 for 8,000 was sold for 3,000. The sale proceeds were debited to the bank account and credited to the sales account, and no other entries have been made in the financial statements relating to this transaction. 2. Depreciation has not yet been provided for the year. The following rates are applied on the straight-line basis, with the assumption of no residual value: Fixtures and fittings 10 per cent Motor vehicles 20 per cent The company s policy is to provide a full year s depreciation in the year of acquisition and no depreciation in the year of disposal. 3. Inventory at 31 December 20X2 amounted to 45,000. 4. Rates paid in advance amount to 400. Insurance includes 200 paid in advance. An electricity bill covering the quarter to 31 December 20X2 and amounting to 320 was not received until February 20X3. It is estimated that the audit fee for 20X2 will be 1,500. An accrual also needs to be made in relation to debenture interest. 5. A general provision for bad debts of 4 per cent of trade receivables is to be carried forward. 6. The directors propose a dividend of 10,000

Required

a. Prepare a statement of comprehensive income and statement of financial position on the basis of the above information.

b. Explain the meaning of the terms provision and reserve , giving one example of each