tract of Pre-Adjustment Trial Balance of New Fashion Designers as at 28 February 2019 NOMINAL SECTION DEBIT CREDIT Sales 945 000 Cost of sales 150 600 Carriage on sales 22 620 Debtors allowances 8 050 Bank charges 1 750 Bad debts 445 Stationery 8 360 Insurance 27 400 Telephone 19 480 Rent expense 92 000 Consumable stores 550 Discount received 7 700 Salaries 291 000 Bad debts recovered 1 850 Adjustments and additional information. 1. The owner took R50 worth of stationery for his son, this was not recorded in the books. 2. On 1 March 2017, New Fashion Designers acquired a warehouse as per lease agreement. A rental of R12 000 per month was agreed upon. Rent was increased by 10% on 1 January 2019. Adjust the rent payable accordingly. 3. Write off a further amount as irrecoverable, R770. 4. Salaries had been paid for 15 months. 5. According to the physical stock count, Consumable stores, R450 were on hand. 6. Insurance included an amount of R400 which was payable for March 2019. Required. Use the Pre-Adjustment Trial Balance extract, additional information and calculate the amounts to be disclosed in the Income Statement of New Fashion Designers for year ended 28 February 2019 for the following accounts; a. Sales b. Bad debts c. Stationery d. Insurance e. Rent expense f. Consumable stores g. Salaries.
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.
Extract of Pre-Adjustment
|
NOMINAL SECTION |
DEBIT |
CREDIT |
|
Sales |
|
945 000 |
|
Cost of sales |
150 600 |
|
|
Carriage on sales |
22 620 |
|
|
Debtors allowances |
8 050 |
|
|
Bank charges |
1 750 |
|
|
|
445 |
|
|
Stationery |
8 360 |
|
|
Insurance |
27 400 |
|
|
Telephone |
19 480 |
|
|
Rent expense |
92 000 |
|
|
Consumable stores |
550 |
|
|
Discount received |
|
7 700 |
|
Salaries |
291 000 |
|
|
Bad debts recovered |
|
1 850 |
Adjustments and additional information.
1. The owner took R50 worth of stationery for his son, this was not recorded in the books.
2. On 1 March 2017, New Fashion Designers acquired a warehouse as per lease agreement. A rental of R12 000 per month was agreed upon. Rent was increased by 10% on 1 January 2019. Adjust the rent payable accordingly.
3. Write off a further amount as irrecoverable, R770.
4. Salaries had been paid for 15 months.
5. According to the physical stock count, Consumable stores, R450 were on hand.
6. Insurance included an amount of R400 which was payable for March 2019.
Required.
Use the Pre-Adjustment Trial Balance extract, additional information and calculate the amounts to be disclosed in the Income Statement of New Fashion Designers for year ended 28 February 2019 for the following accounts;
a. Sales
b. Bad debts
c. Stationery
d. Insurance
e. Rent expense
f. Consumable stores
g. Salaries.
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