Answer :
Certainly! Let's break down the given accounting activity into parts for clarity and step-by-step completion.
### 5.1: Statement of Comprehensive Income
To prepare the Statement of Comprehensive Income for Mhlanga Bed Shop for the year ending 30 June 2023, we need certain components:
1. Revenue (Sales)
2. Cost of Sales
3. Gross Profit
4. Operating Expenses and Income
5. Net Profit
Revenue and Cost of Sales
First, let's consider the sales and cost of sales:
- Sales (Revenue): This should be found in the trial balance.
- Returns: Adjust for the returns provided.
Next, calculate Cost of Sales:
[tex]\[ \text{Cost of Sales} = \text{Opening Inventory} + (\text{Purchases} - \text{Purchase Returns}) - \text{Closing Inventory} \][/tex]
Operating Expenses
Include adjustments such as:
- Depreciation
- Unpaid expenses (Water and Electricity)
- Bad debts write-offs
- Adjustments for rent/insurance
### Operating Expenses Details
1. Water and Electricity Adjustment:
[tex]\[ \text{Add:} \, \text{R4 300 (Unpaid)} \][/tex]
2. Depreciation:
- Vehicles:
[tex]\[ \text{Depreciation on old vehicles} = 20\% \times \text{Cost of old vehicles (from trial balance)} \][/tex]
[tex]\[ \text{Depreciation on new vehicles} = 20\% \times \text{R290,000} \times \left(\frac{3}{12}\right) \][/tex]
- Equipment:
[tex]\[ \text{Depreciation on equipment} = 15\% \times \text{Book Value (from trial balance)} \][/tex]
3. Insurance Adjustment:
[tex]\[ \text{Insurance for Apr-Jun 2023} = \frac{3}{12} \times \text{R15,000} \][/tex]
4. Rent Adjustment:
[tex]\[ \text{Annual Rent with increase calculation} \][/tex]
5. Bad Debts Write-Off:
[tex]\[ \text{Write-Off: R3,200} \][/tex]
Notes to the Income Statement:
- Prepare detailed notes or breakdowns of Revenue, Cost of Sales, and Operating Expenses.
### 5.2: Notes to the Statement of Financial Position
- Trading Stock: Adjust closing stock.
- Stationery: End of financial year amount.
- Debtors and Creditors Adjustments:
- M Fouche bed return adjustment.
- P Ledwaba's account write-off.
- Debtor to Creditor transfer for debit balance.
### 5.3: Statement of Financial Position
Prepare the balance sheet using adjusted balances:
#### Assets
Non-Current Assets:
- Vehicles (total after depreciation)
- Equipment (total after depreciation)
- Fixed Deposit (adjust for maturity)
Current Assets:
- Trading Stock: R1,220,000
- Stationery: R850
- Debtors (after adjustments)
- Cash and Cash Equivalents: (from trial balance with any adjustments for unpaid expenses)
#### Liabilities
Non-Current Liabilities:
- Loan: Principal remaining (excluding interest added in repayment)
Current Liabilities:
- Creditors for purchases
- Unpaid water and electricity (R4,300)
- Interest on loans due within the year
#### Equity
Owner’s Equity:
- Capital: Adjust for drawings and additional capital
- Retained Earnings: Adjust for net income
### 6.1 Accounting Principles
#### 6.1. Provide the correct principle:
1. Be conservative and realistic in disclosing information.
- Prudence concept: Recognize expenses and liabilities as soon as possible.
2. Items that are of significance must be treated separately.
- Concept of Materiality: Separate significant items.
3. The business and the owner's affairs must be kept separately.
- Business Entity Rule: Maintain business and personal transactions separately.
4. Assets are always reflected at their original cost price.
- Historical Cost Rule: Record assets at original cost.
### 6.2 Statements for LOLO Traders (2019)
Income Statement:
1. Revenue: Adjust for sales returns and recognitions.
2. COGS: Calculate as above with beginning and ending inventory.
3. Operating Expenses: Include all necessary adjustments (e.g., bad debts, insurance).
4. Net Income: Calculate after all expenses and adjustments.
Owner’s Equity Note:
- Start with opening balance
- Add net income
- Subtract drawings
---
Using the above guidelines allows completing the required financial statements and notes with the provided information and adjustments.
### 5.1: Statement of Comprehensive Income
To prepare the Statement of Comprehensive Income for Mhlanga Bed Shop for the year ending 30 June 2023, we need certain components:
1. Revenue (Sales)
2. Cost of Sales
3. Gross Profit
4. Operating Expenses and Income
5. Net Profit
Revenue and Cost of Sales
First, let's consider the sales and cost of sales:
- Sales (Revenue): This should be found in the trial balance.
- Returns: Adjust for the returns provided.
Next, calculate Cost of Sales:
[tex]\[ \text{Cost of Sales} = \text{Opening Inventory} + (\text{Purchases} - \text{Purchase Returns}) - \text{Closing Inventory} \][/tex]
Operating Expenses
Include adjustments such as:
- Depreciation
- Unpaid expenses (Water and Electricity)
- Bad debts write-offs
- Adjustments for rent/insurance
### Operating Expenses Details
1. Water and Electricity Adjustment:
[tex]\[ \text{Add:} \, \text{R4 300 (Unpaid)} \][/tex]
2. Depreciation:
- Vehicles:
[tex]\[ \text{Depreciation on old vehicles} = 20\% \times \text{Cost of old vehicles (from trial balance)} \][/tex]
[tex]\[ \text{Depreciation on new vehicles} = 20\% \times \text{R290,000} \times \left(\frac{3}{12}\right) \][/tex]
- Equipment:
[tex]\[ \text{Depreciation on equipment} = 15\% \times \text{Book Value (from trial balance)} \][/tex]
3. Insurance Adjustment:
[tex]\[ \text{Insurance for Apr-Jun 2023} = \frac{3}{12} \times \text{R15,000} \][/tex]
4. Rent Adjustment:
[tex]\[ \text{Annual Rent with increase calculation} \][/tex]
5. Bad Debts Write-Off:
[tex]\[ \text{Write-Off: R3,200} \][/tex]
Notes to the Income Statement:
- Prepare detailed notes or breakdowns of Revenue, Cost of Sales, and Operating Expenses.
### 5.2: Notes to the Statement of Financial Position
- Trading Stock: Adjust closing stock.
- Stationery: End of financial year amount.
- Debtors and Creditors Adjustments:
- M Fouche bed return adjustment.
- P Ledwaba's account write-off.
- Debtor to Creditor transfer for debit balance.
### 5.3: Statement of Financial Position
Prepare the balance sheet using adjusted balances:
#### Assets
Non-Current Assets:
- Vehicles (total after depreciation)
- Equipment (total after depreciation)
- Fixed Deposit (adjust for maturity)
Current Assets:
- Trading Stock: R1,220,000
- Stationery: R850
- Debtors (after adjustments)
- Cash and Cash Equivalents: (from trial balance with any adjustments for unpaid expenses)
#### Liabilities
Non-Current Liabilities:
- Loan: Principal remaining (excluding interest added in repayment)
Current Liabilities:
- Creditors for purchases
- Unpaid water and electricity (R4,300)
- Interest on loans due within the year
#### Equity
Owner’s Equity:
- Capital: Adjust for drawings and additional capital
- Retained Earnings: Adjust for net income
### 6.1 Accounting Principles
#### 6.1. Provide the correct principle:
1. Be conservative and realistic in disclosing information.
- Prudence concept: Recognize expenses and liabilities as soon as possible.
2. Items that are of significance must be treated separately.
- Concept of Materiality: Separate significant items.
3. The business and the owner's affairs must be kept separately.
- Business Entity Rule: Maintain business and personal transactions separately.
4. Assets are always reflected at their original cost price.
- Historical Cost Rule: Record assets at original cost.
### 6.2 Statements for LOLO Traders (2019)
Income Statement:
1. Revenue: Adjust for sales returns and recognitions.
2. COGS: Calculate as above with beginning and ending inventory.
3. Operating Expenses: Include all necessary adjustments (e.g., bad debts, insurance).
4. Net Income: Calculate after all expenses and adjustments.
Owner’s Equity Note:
- Start with opening balance
- Add net income
- Subtract drawings
---
Using the above guidelines allows completing the required financial statements and notes with the provided information and adjustments.
