Week 8 – SS3 First Term Financial Accounting Notes

 WEEK EIGHT
THE FINAL ACCOUNTS OF LIMITED LIABILITY COMPANIES
The final accounts of limited liability companies comprises the following:

1. Trading, Profit and Loss Account.
2. Appropriation Account.
3. Balance Sheet.
   

 Format of Trading Profit & Loss account
Trading Profit & Loss account for the year ended 31/12/9x
Opening Stock            x        Stock                x
Add purchases        x            Less return inward        x
Less return outward    x    x        Gross loss            x
Cost of goods available        x
Less closing stock        x
Cost of sales            x
Gross profit c/d            x    
                    X                        x
Expenses                    Gross profit b/d        x
Wages & salaries        x        Income from quoted In.     x
Rent & Rate            x        Rent receivable        x
Depreciation of assets        x        Discount received        x
Directors remuneration        x        Other incomes        x        
Auditors remuneration        x                        x
Advertising            x
Hire of plant            x
Debenture interest        x
Insurance                x
Other expenses            x
Net profit                x
                    X                        x

 
 Appropriation account    
Corporate tax            x    Balance b/f from last year        x
General reserve            x    Net profit b/d                x
Revenue reserve            x
Dividend interim            x
Proposed dividend        x
Goodwill written off        x
Retained profit c/d        x    
                    X                        x
Balance sheet format
Authorized capital            N        Fixed asset
                                        Cost    Dep.    NBN
Ordinary share @ N1 each        x        Land & build X     (x)    X
10% Preference Share @ N 1 each     x        Furniture     x    (x)    x
                        X        Machinery x    (x)    x
Issued share capital                    Premises     x    (x)    x
Ordinary share @ N 1 each         x        Goodwill            x
10% preference share @ N 1 each    x        investments
Reserves                        Quoted    x
Share premium            x            Unquoted    x
General reserve            x            Current assets x
Retained profit            x            Stock        x    
Capital redemption reserve    x            Debtors    x
Long-term liabilities                    Cash        x
10% Debenture            x            Bank        x
Current liabilities                        Bill receivable x
Bill payable        x                Prepayment    x
Income in advance    x                Accrued income    x    x
Corporate tax        x                Preliminary expenses    x
Creditors            x
Proposed dividend    x
Accruals            x    x                            
                    X                            x
EVALUATION
1.    List five items that features in the Appropriation Account of a limited liability company.
2.    Explain the following terms:
    a.    Debentures
    b.    Authorised share capital
    c.    Issued capital
    d.    Proposed dividend
    e.    Revenue reserve

 ILLUSTRATION
The following Trial Balance was extracted from the books of Johnson Nigeria Limited as at 31^st December,1990.

 Additional information

• Stock at close ₦12,500

• Expense unpaid: motor expenses – ₦ 20

Insurance – ₦ 450
Sundry experiences – ₦400

• Prepaid expenses: Rate – ₦ 320

  Sundry expenses – ₦ 250

• Provision for bad debts to be increased to – ₦2,800
• Part of the premises is sublet at ₦2,400 per annum
• Bad debts at 31^st December, ₦600
• Monthly salaries and wages bill ₦400
• Loan interest is 5% per annum
• Provide for depreciation on a straight line method: premises 2% ,plant & machinery 25%,motor vehicle 10%
• Write off preliminary expenses
• Transfer to general reserves ₦5,000 and ₦5,000 to revenue reserve.

Prepare :

• Trading, Profit and Loss and Appropriation Account of the year ended 31^st December ,1990
• a Balance Sheet as at that date.

 Solution:
Johnson Nigeria Limited
Trading,profit and loss for the year ended 31^st December ,1990

Balance sheet as at 31^st December ,1990

 
 Evaluation

1. What is fixed assets and give five examples of fixed assets.

1. Define intangible assets and mention three examples

 Reading assignment
Essential Financial Accounting page 265-282

 Weekend Assignment

1. Net purchase in trading account is —————- (a)purchases –return outwards (b) purchases – return inward (c)purchases – carriage inwards (d) purchases – sales
2. Net sales in trading account is ————– (a)purchases – sales (b)sales – return inwards (c)sales – return outwards (d) sales + purchases
3. Working capital is ————— (a)current assets – current liabilities ( b) current liabilities – current assets (c) total current assets (d) current assets + stock
4. Capital owned is ————— (a)current assets – total liabilities (b) total assets – total liabilities (c) total assets + total capital (d) current assets + stock
5. Capital employed is ———– (a)total assets – current liabilities (b)total assets – total liabilities (c ) total liabilities + all assets (d) current assets + current liabilities

 THEORY

1. What is bonus issue?
2. Enumerate five features of private limited company.

GENERAL EVALUATION

1. List five methods of providing for depreciation of fixed assets.
2. State five reasons for making provision for depreciation of fixed assets.
3. List eight errors that will affect the agreement of the trial balance.
4. Give five reasons for preparing departmental accounts.
5. List and explain five classifications of the Ledger.