1
Although Janet Lambert has run a small business for many years, she has never kept
adequate accounting records. However, a need to obtain a bank loan for the expansion of the
business has necessitated the preparation of ‘final’ accounts for the year ended 31 August 2009. As
a result, the following information has been obtained after much careful research:
1
Janet Lambert’s business assets and liabilities are as follows:
2
All takings have been banked after deducting the following payments:
Cash drawings – Janet Lambert has not kept a record of cash
drawings, but suggests these will be in the region of £8,000
Casual labour £1,200
Purchase of goods for resale £1,800
Note
: Takings have been the source of all amounts banked.
3
Bank payments during the year ended 31 August 2009 have been summarised as follows:
£
Purchases 101,500
Rent 5,040
Electricity 1,390
Delivery costs (to customers) 3,000
Casual labour 6,620
4
It has been established that a gross profit of 331/3% on cost has been obtained on all goods
sold.
5
Despite her apparent lack of precise accounting records, Janet Lambert is able to confirm that
she has taken out of the business during the year under review goods for her own use costing
£600.
Required:
(a) Prepare a computation of total purchases for the year ending 31 August 2009.
(b) Prepare a trading and profit and loss account for the year ended 31 August 2009 and a balance
sheet as at that date, both in as much detail as possible.
(c) Explain why it is necessary to introduce accruals and prepayments into accounting.
(Association of Accounting Technicians)