NABTEB Accounting 2022 Theory — Question 7

Model answer

Trading, Profit and Loss Account for the year ended 31/12/18: Sales Le1,500,000 Less Cost of goods sold: Opening stock 300,000 + Purchases 1,000,000 - Closing stock 400,000 = 900,000 Gross profit = Le600,000 Less Expenses: General expenses 280,000; Debenture interest 8,400; Directors' remuneration 70,000; Depreciation - plant and machinery 32,000; motor vehicles 14,000 Net profit = Le195,600 Appropriation Account: Net profit b/f from previous year 8,600 + Net profit for the year 195,600 = 204,200 Less: Transfer to general reserve 12,000 Retained/undistributed profit carried forward = Le192,200 Balance Sheet as at 31/12/18 (Le): Fixed assets: Plant and machinery 160,000 less accumulated depreciation 32,000 = 108,000; Motor vehicle 70,000 less depreciation 24,000 = 46,000 Financed by: Authorized & issued share capital - Ordinary shares 400,000 + 8% Preference shares 100,000 = 500,000; General reserve 22,000; Retained profit 192,200; Long-term liabilities - Debentures 120,000; Current liabilities - Creditors 172,400; Accrued director's remuneration 70,000 Current assets: Debtors 500,000; Stock 400,000; Bank 22,600 (Total assets = Total capital and liabilities = Le1,076,600, confirming the accounts balance.)