EASTERN UNIVERSITY, SRI LANKA
FACULTY OF COMMERCE AND MANAGEMENT
DEPARTMENT OF COMMERCE
DAF 2043 ADVANCED ACCOUNTING
COMPANY ACCOUNTS
Exercise 01
USB, a limited liability company, has the following trial balance at 31 December 2021.
Cash at bank
Inventory at 1 January 2021
Administrative expenses
Distribution costs
Non-current assets at cost:
Buildings
Plant and equipment
Motor vehicles
Suspense
Accumulated depreciation:
Buildings
Plant and equipment
Motor vehicles
Retained earnings
Trade receivables
Purchases
Dividend paid
Sales revenue
Sales tax payable
Trade payables
Re. 1 ordinary shares
Debit
Rs
100,000
2,400,000
2,206,000
650,000
Credit
Rs
10,000,000
1,400,000
320,000
1,500,000
4,000,000
480,000
120,000
560,000
876,000
4,200,000
200,000
22,352,000
11,752,000
1,390,000
1,050,000
1,500,000
22,352,000
The following additional information is relevant.
a. Inventory at 31 December 2021 was valued at Rs. 1,600,000. While doing the inventory count,
errors in the previous year's inventory count were discovered. The inventory brought forward at the
beginning of the year should have been Rs. 2.2m, not Rs. 2.4m as shown in the trial balance.
b. Depreciation is to be provided as follows:
c.
o
Buildings at 5% straight line, charged to administrative expenses
o
Plant and equipment at 20% on the reducing balance basis, charged to cost of sales.
o
Motor vehicles at 25% on the reducing balance basis, charged to distribution costs.
No final dividend is being proposed.
d. A customer has gone bankrupt, owing Rs. 76,000. This debt is not expected to be recovered and
an adjustment should be made. An allowance for receivables of 5% is to be set up.
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e. 1 million new ordinary shares were issued at Rs. 1.50 on 1 December 2021. The proceeds have
been left in a suspense account.
You are required to prepare the following:
1. Statement of profit or loss for the year ended 31 December 2021
2. Statement of changes in equity for the year ended 31 December 2021
3. Statement of financial position as at 31 December 2021
Exercise 02
The trial balance of MYNA LTD as at 31 December 2021 is as follows.
Rs.'
000
Dr
Cr
Stated capital
Retained earnings
50,000
435,432
Income tax payable as at 1 January 2021
Income tax paid
25
27
Property, plant and equipment - at cost
Land and building (Land: Rs. 300 million)
513,500
Machinery
181,800
Furniture and fittings
Accumulated depreciation as at 1 January 2021
9,275
Building
Machinery
14,110
21,320
Furniture and fittings
2,115
Inventory as at 1 January 2021
Trade receivables/Trade payables
45,000
102,000
Allowance for doubtful debts
82,400
1,000
Cash and cash equivalents
16,300
Prepayment
6,500
Bank loan
60,000
Accrued expenses
7,500
Purchases/Sales
Administrative expenses
1,112,500
145,200
Distribution expenses
1,557,500
92,000
Finance expenses
7,300
2,231,402
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2,231,402
Additional information
a) On 31 December 2021, a customer placed a firm order for goods with MYNA LTD amounting to
Rs. 750,000. This has been included in the sales and trade receivables as MYNA LTD is confident
that the sale will take place.
b) Cost of the inventory held as at 31 December 2021 was Rs. 65,532,000. The net realisable value
was Rs. 70,675,000.
c) On 1 April 2021, the company purchased new machinery at a cost of Rs. 28,850,000. The
installation costs were Rs. 315,000, and Rs. 16,000 was incurred a few days later to test the
machinery before it was used for the production of goods. Staff training cost on how to use the
machinery was Rs. 34,000. The total of these costs are shown in the trial balance under machinery.
d) Property, plant and equipment should be depreciated as follows:
a. Building: over 50 years
b. Machinery: over 10 years
c.
Furniture and fittings: over 8 years
e) A customer has gone bankrupt, owing Rs. 90,000, and this amount is not expected to be recovered.
An allowance for the balance receivables should be made at 5%.
f)
A bank loan was obtained on 1 December 2021 at an interest rate of 12% p.a. As agreed by the
bank, out of this loan an amount of Rs. 10 million should be repayable on 1 December 2021 and
the balance should be repayable within 4 years starting from 1 December 2022. Interest for the
year ended 31 December 2021 has not yet been accounted for.
g) Accrued expenses do not include the following bills payable for December 2021. Electricity: Rs.
120,000 and Water: Rs. 15,000
h) The company estimates that the tax liability based on the current year profit (after all the
adjustments) will be Rs. 150,000. The amount reflected as income tax paid in the trial balance is in
relation to the prior year
Required
a) Prepare the statement of Profit or Loss and the comprehensive income for
the year
31 December 2021.
b) Prepare the statement of changes in equity for the year ended 31 December 2021.
c) Prepare the statement of financial position as at 31 December 2021.
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ended