Question

The accountant of FID has started to prepare the financial statements for the year ended 31 December 2016. The items included in the trial balance as at 31 December 2016 were as follows:
Particulars
Amount (in ‘000)
Land
100
Buildings
120
Plant and machinery
170
Accumulated depreciation of plant and machinery
120
Capital
300
Receivables
197
Payables
110
Inventory
190
Operating profit
83
5% Loan notes
180
Cash at bank and in hand
12
Suspense (may be a debit or a credit balance)
???
Adjustments;
 The sales ledger control account figure, which is used in the trial balance, does not agree with the total of the sales ledger balances. A contra of $5,000 has been entered correctly in the individual ledger accounts but has been entered on the wrong side of both control accounts.
 The balance of $4,000 on sales returns account has inadvertently been omitted from the trial balance, though correctly entered in the ledger records.
 A standing order of receipt from a regular customer for $2,000, and bank charges of $1,000, have been completely omitted from the accounting records.
 The loan notes were issued on 1 September 20X6 and no payment of interest had been made by 31 December 20X6.
Prepare
 Prepare a trial balance as at 31 December 2016 and identify the balance on the suspense account.
 Prepare the journal entries to correct the suspense account balance.
 Calculate the accrual required for interest on the 5% loan notes.
 State the journal adjustment required to account for the standing order receipt and the
bank charges omitted from the accounting records.
 Prepare the final accounts (i.e., statement of profit or loss and statement of financial
position) as on 31-12-2016.

Answer 1

Answer:

The accountant of FID has started to prepare the financial statements for the year ended 31 December 2016. The items included in the trial balance as at 31 December 2016 were as follows:

Particulars

Amount (in ‘000)

Land

100

Buildings

120

Plant and machinery

170

Accumulated depreciation of plant and machinery

120

Capital

300

Receivables

197

Payables

110

Inventory

190

Operating profit

83

5% Loan notes

180

Cash at bank and in hand

12

Suspense (may be a debit or a credit balance)

???

Adjustments;

 The sales ledger control account figure, which is used in the trial balance, does not agree with the total of the sales ledger balances. A contra of $5,000 has been entered correctly in the individual ledger accounts but has been entered on the wrong side of both control accounts.

 The balance of $4,000 on sales returns account has inadvertently been omitted from the trial balance, though correctly entered in the ledger records.

 A standing order of receipt from a regular customer for $2,000, and bank charges of $1,000, have been completely omitted from the accounting records.

 The loan notes were issued on 1 September 20X6 and no payment of interest had been made by 31 December 20X6.

Prepare

 Prepare a trial balance as at 31 December 2016 and identify the balance on the suspense account.

 Prepare the journal entries to correct the suspense account balance.

 Calculate the accrual required for interest on the 5% loan notes.

 State the journal adjustment required to account for the standing order receipt and the

bank charges omitted from the accounting records.

 Prepare the final accounts (i.e., statement of profit or loss and statement of financial

position) as on 31-12-2016.