The trial balance extracted from the books of Kami Limited as at 31 December 2019 was as follows: Dr Cr $'000 000.$ Office equipment, at cost 300,000 Motor vehicle, at cost 70,200 Accumulated depreciation at 1 January 2019: Office equipment 24,648 Motor vehicle 7,560 Bank 246,144 Inventory at 1 January 2019 887,028 Accounts receivable 1,900,560 Accounts payable 939,816 Purchases 5,424,240 Transportation in 51,744 Sales 9,010,272 Administrative expenses 1,145,040 Selling expenses 964,224 Bank loan, repayable in 2022 120,000 Bank loan interest expenses 42,000 Ordinary share capital 810,000 (720,000,000 shares in issue and fully paid) General reserve 6,000 Retained profits at 1 January 2019 112,884 11,031,180 11,031,180 The following additional information is available: (i) Inventory as at 31 December 2019 was valued at $560,400,000 after inventory count. (ii) The bank statement for December 2019 showed a bank loan interest of $1,200,000 was deducted but no entries have been recorded in the book. (iii) It was discovered that a payment of $9,600,000 for purchase of office equipment on 1 January 2019 had been wrongly treated as purchase of inventory. The cash paid was correctly recorded in the bank account. No adjustment has been made. There are no other additions or disposal of fixed asset during the period. (iv) Depreciation is to be provided for the year as follows: Office equipment: straight line method with useful life of 5 years and no residual value. Motor vehicle: double declining balance method with useful life of 8 years and residual value $120,000. (v) The following year-end adjustments are to be made: $'000 Accrued administrative expenses 14,400 Prepaid selling expenses remained 6,264 Profits tax provision for 2019 88,200 (vi) The company declared a bonus issue of one for ten shares. The bonus issue is financed by transferring $72,000 out of retained earnings to share capital account during the year. These shares are not entitled to any dividends for the year of 2019. No entries have been made. (vii) The following appropriations are to be made: Transfer to general reserve: $24,000,000 Final dividends for ordinary shares: $0.8 per share
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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(a) |
Prepare a statement of profit or loss for the year ended 31 December 2019. Notes to the accounts are not required. |
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