Mr Chai has been trading for some years as a wine merchant. The following list of balances has been extracted from his ledger as at 30 April 20X7, the end of his most recent financial year. Sh Capital 83,887 Sales 259,870 Trade creditors 19,840 Returns out 13,407 Provision for bad debts 512 Discounts allowed 2,306 Discounts received 1,750 Purchases 135,680 Returns inwards 5,624 Carriage outwards 4,562 Drawings 18,440 Carriage inwards 11,830 Rent, rates and insurance 25,973 Heating and lighting 11,010 Postage, stationery and telephone 2,410 Advertising 5,980 Salaries and wages 38,521 Bad debts 2,008 Cash in hand 534 Cash at bank 4,440 Stock as at 1 May 20x6 15,654 Trade debtors 24,500 Fixtures and fittings – at cost 120,740 Provision for depreciation on fixtures and fittings – as at 30 April 20X7 63,020 Depreciation 12,074 The following additional information as at 30 April 20X7 is available: (a) Stock at the close of business was valued at Sh. 17,750. (b) Insurances have been prepaid by Sh. 1,120. (c) Heating and lighting is accrued by Sh. 1,360. (d) Rates have been prepaid by Sh. 5,435. (e) The provision for bad debts is to be adjusted so that it is 3% of trade debtors. Required (i) Draw a trial balance as at 30 April 20X7
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Mr Chai has been trading for some years as a wine merchant. The following list of balances has been extracted from his ledger as at 30 April 20X7, the end of his most recent financial year.
|
|
Sh |
|
Capital |
83,887 |
|
Sales |
259,870 |
|
Trade creditors |
19,840 |
|
Returns out |
13,407 |
|
Provision for |
512 |
|
Discounts allowed |
2,306 |
|
Discounts received |
1,750 |
|
Purchases |
135,680 |
|
Returns inwards |
5,624 |
|
Carriage outwards |
4,562 |
|
Drawings |
18,440 |
|
Carriage inwards |
11,830 |
|
Rent, rates and insurance |
25,973 |
|
Heating and lighting |
11,010 |
|
Postage, stationery and telephone |
2,410 |
|
Advertising |
5,980 |
|
Salaries and wages |
38,521 |
|
Bad debts |
2,008 |
|
Cash in hand |
534 |
|
Cash at bank |
4,440 |
|
Stock as at 1 May 20x6 |
15,654 |
|
Trade debtors |
24,500 |
|
Fixtures and fittings – at cost |
120,740 |
|
Provision for |
63,020 |
|
Depreciation |
12,074 |
The following additional information as at 30 April 20X7 is available:
(a) Stock at the close of business was valued at Sh. 17,750.
(b) Insurances have been prepaid by Sh. 1,120.
(c) Heating and lighting is accrued by Sh. 1,360.
(d) Rates have been prepaid by Sh. 5,435.
(e) The provision for bad debts is to be adjusted so that it is 3% of trade debtors.
Required
(i) Draw a
b) The following transactions related to the affairs of DAIMA Photo Studio:
1. Paid telephone bill of Sh. 1,150 cash.
2. Purchased office supplies Sh.20, 000 on credit.
3. The owner invested an additional Sh.35, 750 in the business.
4. Received Sh. 1,850 in cash from a customer as an advance payment for photography work to be done.
5. Paid Sh.20, 000 for supplies paid on credit.
6. Billed a customer Sh.5, 000 for photography services performed.
7. Owner withdrew Sh.5, 750 from the business for living expenses.
Required
i) Draw up the
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