Practical exercise 1
Collins Colman Limited
Collins Colman Limited is a new business that started trading on 1 January 2019. You
have recently been appointed as an account manager within the accounting department
and have been presented with the following summary of transactions that have occurred
during the first year of trading:
1. The owners introduced 216,000 of equity, which was paid into a bank account
opened in the name of the business.
2. Premises were rented from 1 January 2019 at an annual rate of 108,000. During
the year, rent of 135,000 was paid to the owner of the premises
3. Rates (a tax on business premises) were paid during the year as follows:
a. For the period 1 January 2019 to 31 March 2019 2,880
b. For the period 1 April 2019 to 31 March 2020 5,400
4. A delivery van was bought on 1 January 2019 for 72,000. This is expected to be
used in the business for six years and then to be sold for 6,000.
5. Wages totalling 140,400 were paid during the year. At the end of the year, the
business owed £2,610 of wages for the last week of the year.
6. Electricity bills for the first three quarters of the year were paid totalling 6,840.
After 31 December 2019, but before the financial statements had been finalized
for the year, the bill for the last quarter arrived showing a charge of 2,430.
7. Inventories totalling 583,200 were bought on credit.
8. Inventories totalling 46,800 were bought for cash.
9. Sales revenue on credit totalled 604,800 (cost of sales 291,600).
10. Cash sales revenue totalled 154,800 (cost of sales 64,800).
11. Receipts from trade receivables totalled 525, 600.
12. Payments to trade payables totalled 471,600.
13. Van running expenses paid totalled 40,320.
At the end of the year it was clear that a credit customer (trade receivables) who owed
1,800 would not be able to pay any part of the debt. All of the other trade receivables
were expected to settle in full.
The business uses straight-line depreciation for non-current assets.
Required:
Prepare for Collins Colman Limited, a Statement of Income for the year ended 31st
December 2019 and a Statement of Financial Position as at 31 December 2019. (20
marks)
b. Who are the likely users of these statements and for what purpose?
Question 2
From the statements prepared above, prepare a set of management accounts complete with an executive
summary, a body and a conclusion.
Question 3
Research on the statement of changes in equity and give a summary on it.
Question 4
You are the accountant at ABC limited a company dealing with manufacturing and packaging of cattle
feeds. Prepare a fixed asset register to capture motor vehicles, manufacturing equipment and general
office equipment.