Principles of Accounts

Subject Principles of Accounts
  1. The following should be noted regarding the bank balance.
    I. Bank charges for $2,000 debited to the bank statement remain unrecorded at year-end.
    II. A cheque for $2,500 for December’s salary was recorded in the books only in January 2022.
    III. $20,000 received from a receivable account had been entered twice in the books.
  2. The inventory was valued at $200,000 as of 31 December 2021 at sales value. Included in the closing stock were some damaged goods costing $5,000. These goods were subsequently sold in January 2022 for $4,000. A transportation cost of $500 was incurred. The company profit margin is 50%.
  3. The business insurance accounts reflect insurance premiums paid for twelve months starting from 1st March 2021.
  4. A Bad Debt of $5,000 is to be written off and a provision of 1 % against the remaining trade receivable as of 31 December 2021 should be reflected at year-end.
  5. The unpaid interest on the loan was paid only on 1 January 2022. The interest rate on the loan is 10% per annum.
  6. A delivery van, the cost of which is $20,000, with an accumulated depreciation of $8,000 was sold in December 2022, and the sales proceeds of $20,000 are credited to the sales account. No other entries have been made for this disposal. No depreciation is charged in the year of sale.
  7. The utility expense for the month of December 2021 of $1,500 was unpaid as of 31 December 2021.
  8. Taxation expense is estimated at $20,000 for the year ending 31 December 2021. The taxation balance in the trial balance represents an under-estimate of the taxes paid for the year ended 31 December 2020.
  9. Provision is to be made for unpaid audit fees of $10,000 for the year ending 31 December 2021.
  10. The Director’s remuneration of $4,000 remains unpaid at year-end.
  11. During the year, 20,000 ordinary shares were issued at $1.50 per share, the sales proceeds of which were credited to the sales account.
  12. $5,000 from the retained profit is to be transferred to the general reserves.
  13. The preference shares are redeemable on 31 December 2025 and carry a fixed dividend rate of 5% per annum.