James Dunn operates a small fishing supplies business called “On the Fly”. The following figures show some of his ledger balances which were extracted on 30 April Year 5.
1. James Dunn operates a small fishing supplies business called “On the Fly”. The following
figures show some of his ledger balances which were extracted on 30 April Year 5:
Trade Receivables 3,000
Bank Loan 2,000
Inventory at 1 May Year 4 4,600
Carriage Outwards 350
Carriage Inwards 175
Sales Revenue 73,250
Purchase Returns 900
Provision for Depreciation of Van 3,000
Van (at cost) 10,000
Bad Debts 150
Rent Received 1,200
Trade Payables 2,500
Sales Revenue Returns 150
Loan Finance Costs 200
Discount Received 250
NOTES AT 30 APRIL YEAR 5
• Inventory is £5,000
• Electricity paid in advance was £90
• Wages owing were £1,000
• Depreciation of the van is to be provided at 15% on cost
• A provision for bad debts of 10% of trade receivables is to be created
Use Pages 2–5 of the Workbook to answer this question.
(a) Select the necessary information and prepare:
(i) The Income Statement for the year ended 30 April Year 5.
(ii) The Equity Section (“Bottom Section”) of the Statement of Financial
Position as at 30 April Year 5.
(b) Outline why a Cash & Cash Equivalents account can have either a Debit or Credit
balance in the Trial Balance.
(c) James Dunn is going to expand his business by buying new property.
(i) Identify the source of finance normally used to buy property.
(ii) Give one advantage and one disadvantage of this source of finance.