Preparing Financial Statements for P Davenport
What are the steps to prepare the Statement of Profit or Loss and Statement of Financial Position for P Davenport based on the given data?
Statement of Profit or Loss:
Cost of Goods Sold (COGS):
COGS = Opening inventory + Purchases - Closing inventory
COGS = $1,924 + $75,390 - $2,306
COGS = $75,008
Gross Profit Calculation:
Gross Profit = Sales revenue - COGS
Gross Profit = $88,650 - $75,008
Gross Profit = $13,642
Operating Expenses Determination:
Operating Expenses = Wages and salaries + Insurances + Advertising + Motor vehicle running costs + Accountancy fees + Depreciation on fixtures and fittings + Depreciation on motor vehicles
Operating Expenses = $18,000 + $8,900 + $16,710 + $2,210 + $650 + $910 + $430
Operating Expenses = $47,810
Net Profit Calculation:
Net Profit = Gross Profit - Operating Expenses
Net Profit = $13,642 - $47,810
Net Profit = -$34,168 (indicating a loss for the year)
Statement of Financial Position:
Assets:
- Current Assets:
- Bank: $3,000
- Cash in hand: $40,482
- Trade Receivable: $2,080
- Inventory: $2,306
- Non-Current Assets:
- Fixtures and fittings at cost: $18,200
- Motor vehicles at cost: $10,400
Total Assets Calculation:
Total Assets = Current Assets + Non-Current Assets
Total Assets = $3,000 + $40,482 + $2,080 + $2,306 + $18,200 + $10,400
Total Assets = $76,468
Liabilities:
- Current Liabilities:
- Trade Payable: $165
- Non-Current Liabilities:
- Provision for depreciation on fixtures and fittings: $910
- Provision for depreciation on motor vehicles: $1,830
- Allowance for doubtful debts: 5% of the remaining trade receivable
Total Liabilities Calculation:
Total Liabilities = Current Liabilities + Non-Current Liabilities
Total Liabilities = $165 + $910 + $1,830
Total Liabilities = $2,905
Equity Calculation:
Equity = Capital - Drawings
Equity = $107,370 - $2,210
Equity = $105,160
Total Equity and Liabilities Calculation:
Total Equity and Liabilities = Total Liabilities + Equity
Total Equity and Liabilities = $2,905 + $105,160
Total Equity and Liabilities = $108,065
Therefore, the financial statements for P Davenport can be prepared as shown above.