The Book-keepers Forum (BKF)

Post Info TOPIC: HELP! Experiencing problems when preparing financial statements using the Trial Balances


Newbie

Status: Offline
Posts: 2
Date:
HELP! Experiencing problems when preparing financial statements using the Trial Balances


Hi everyone,

I'm a new member for this forum. I have an uni exam for 'financial accounting' in two days, and I'm experiencing some problems solving questions from the past paper. And the worse thing is my professor didn't give us correct answers for the paper and he's on vacation right now. 

So I came across this website and hope someone here can help me with this. 

I'd really appreciate any help from you guys!!!

So here is the original questions:

 

PART A: Q1. Using the formats provided, complete the income statement, balance sheet and supporting T accounts from the following information as at 31st Dec 2010:
                                                                                                               £000      £000
Ordinary shares @ £1, fully paid                                                                  2800
12% Cumulative, redeemable preference shares @ £1 each                  2200
Revaluation Reserve                                                                                        1724
Retained Profit @ 1st Jan 2010                                                                     1200
Land and buildings less accumulated depreciation                     4480    180
Distribution equipment less accumulated depreciation            2770    1250
Fixtures and fittings less accumulated depreciation                  1540    380
Non-current asset investment and interest received                   2064   272
Debenture interest paid and 15% Debentures (repayable 2015) 36     480
Rental income                                                                                                  140
Stock @ 1st Jan 2010                                                                           2070
Purchases and sales                                                                        10350,  17762
Audit Fees                                                                                                30
Distribution costs                                                                                3068
Administration costs                                                                           2348
Loss on partial closure and reorganisation of the business        390
Trade accounts receivable and payable                                           1300    842
Other accounts receivable and payable                                             58      44
Returns in and and out                                                                          34      50
Cash and bank                                                                                         61      620
Corporation tax liability on 2009 profits (payable 1st Jan 2011)           382
VAT liability                                                                                                       112
Intangible assets                                                                                   179
Long term provision for business reorganisation                                     700
Interim ordinary dividend paid                                                        140
Preference dividend paid                                                                     220           `
                                                                          31138 31138
I've highlighted the terms that I don't understand.
Why is revaluation reserve credited and what is 'returns in and out'?
Also, I mostly don;t understand the account 'Cash and bank'. I know that cash is an asset and debited. But what is bank and why is it credited?
For preparing income statement, do I use the 'Purchase and Sales' for revenue and CoGs?
Hope someone can generously help me out here!
Thanks a lot indeed!
 


__________________


Senior Member

Status: Offline
Posts: 210
Date:

Revaluation reserve - when a fixed asset has been revalued from it's (previous) book value - this is where the difference is put to adhere to the double-entry, (and so it doesn't hit the P&L account)
Debentures - these are loan stock (which are kind of like long term loans which are repayable at some specified point in the future (which is the redemption date) and interest is payable on them in the meantime)
Returns in & Out: This is either goods returned to the company from their customers (returns in) or returns that the company has sent back to it's suppliers (returns out)
Cash & Bank - the amount of cash either in the petty cash or in various bank accounts.
(If there's a credit on the bank account, it's a liability or overdraft owing to the bank)
Revenue =sales
CoG= purchases

Good luck with your exam.

__________________

Louise @Figurate   Tel: 01604 288024
web: www.figurate.co.uk - Chartered Management Accountants
blog: www.happyaccountant.com - free info on accounts, bookkeeping & tax plus the occasional meandering 



Newbie

Status: Offline
Posts: 2
Date:

Thanks a lot, man. Really appreciated it! But for Cash & Bank: DR 61 CR 620. Does it mean a current asset (Cash or equivalent) of 61 and current liability (Bank overdraft) of 620 on the balance sheet? I'm still confused about the bank overdraft part. Is the full portion of CR620 overdraft? Does that mean at that specific date, the business has 61 cash in hand and 620 bank overdraft outstanding? And aren't they supposed to pay interest on the overdraft amount?

Cheers mate!

__________________


Expert

Status: Offline
Posts: 1501
Date:

Hi Kevin

If you have £61 dr and £620 cr in cash/bank means that you have £61 in petty cash/bank accounts and £620 overdrawn in bank.  By inference the credit balance cant be petty cash as you can never have negative petty cash (can only have negative bank).   So yes the £620 cr mush relate in full to bank account(s).

Yes the trial balance is always "as at" a particular date so that shows the position at that date.

Would depend on the terms of the account whether any interest being paid on overdraft.  As this is just an exam question then is probably the reason why no interest shown.  In practice you would expect their to be some interest paid or due to be accrued for an overdrawn account.

Regards

MarkS



__________________

Mark Stewart CA

http://stewartaccounting.co.uk/

Providing accounting, bookkeeping, payroll and tax services to small and medium sized businesses across Central Scotland and beyond.

Page 1 of 1  sorted by
Quick Reply

Please log in to post quick replies.

Tweet this page Post to Digg Post to Del.icio.us
Members Login
Username 
 
Password 
    Remember Me  
©2007-2024 The Book-keepers Forum (BKF). All Rights Reserved. The Book-keepers Forum (BKF) is a trading division of Bookcert Ltd. Registered in England Company Number 05782923. 2 Laurel House, 1 Station Rd, Worle, Weston-super-Mare, North Somerset, BS22 6AR, United Kingdom. The Book-keepers Forum and BKF are trademarks of Bookcert Ltd. This forum is a discussion forum only. There will usually be more than one opinion to any question and any posting should not be viewed as a definitive solution. No responsibility for loss occasioned to any person acting or refraining from action as a result of any posting on this site is accepted by the contributors or The Book-keepers Forum. In all cases, appropriate professional advice should be sought before making a decision. We reserve the right to remove any postings which are offensive, libellous, self-promoting or engaged in covert marketing. We will not notify users of removals. The views expressed in the forum posts are those of the individual and do not necessary reflect or agree with those of The Book-keepers Forum. Any offensive or unsuitable posts will be removed by the moderators. Any reader of this forum can request for a post to be looked into by sending an email to: bookcertltd@gmail.com.

Privacy & Cookie Policy  About