Illustration for preparing final accounts
K Ltd established a branch in Arusha Tanzania on 1.1.X2, when Kshs 1 = TShs 15. PPE costing Kshs 800,000 were purchased on that day. In addition, cash of Shs 500,000 was sent to Arusha on 1.1.X2, together with goods which had cost K Ltd Shs 1m. The Arusha branch sells HO goods and also goods purchased in Tanzania.
Additional information:
1) Inventory at 31 December 20X2 was valued at Tsh 6 million, being goods from HO.
2) Depreciation is to be charged at 10% on the cost of fixed assets.
3) Accrued expenses amounted to Tsh 1.5 million.
4) Prepaid expenses amounted to Tsh 1.8 million.
5) There was no closing inventory of goods purchased in Tanzania.
6) The remittance was made on 1 Oct 2002 and translated into Ksh 1,650,000.
7) Exchange rates during the year were:
Required:
Income statements for the year to 31 December X2 and balance sheets as at that date in
a) Tanzanian shillings
b) Kenya shillings:
- Using the functional currency method of translation;
- Using the presentation method of translation.
Translation of Arusha branch trial balance (functional currency method)
|
|
Original trial balance
|
Rate
|
Translated trial balance
|
|
|
Tsh’000
|
Tsh’000
|
|
Ksh’000
|
Ksh’000
|
|
PPE
|
12,000
|
|
1/15
|
800
|
|
|
Sales
|
|
48,000
|
1/12
|
|
4,000
|
|
Goods from head office
|
15,000
|
|
1/15
|
1,000
|
|
|
Purchases in Tanzania
|
15,000
|
|
1/12
|
1,250
|
|
|
Expenses
|
17,700
|
|
1/12
|
1,475
|
|
|
Receivables & Payables
|
2,000
|
1,000
|
1/10
|
200
|
100
|
|
Cash at bank
|
2,000
|
|
1/10
|
200
|
|
|
Remittances to Kenya
|
19,500
|
|
ACT
|
1,650
|
|
|
Head office current a/c
|
|
34,500
|
ACT
|
|
2,300
|
|
Closing inventory (for balance sheet)
|
6,000
|
|
1/15
|
400
|
|
|
Closing inventory (for trading a/c)
|
|
6,000
|
1/15
|
|
400
|
|
Depreciation expense (P&L )
|
1,200
|
|
1/15
|
80
|
|
|
Provision for depreciation (balance sheet)
|
|
1,200
|
1/15
|
|
80
|
|
Accrued expenses (balance sheet)
|
|
1,500
|
1/10
|
|
150
|
|
Prepaid expenses (balance sheet)
|
1,800
|
|
1/10
|
180
|
|
|
|
92,200
|
92,200
|
|
8,105
|
7,030
|
|
Exchange gain
|
|
|
|
|
205
|
|
|
|
|
|
7,235
|
7,235
|
Translation of Arusha branch trial balance ((Presentation method)
|
|
Original trial balance
|
Rate
|
Translated trial balance
|
|
|
Tsh’000
|
Tsh’000
|
|
Ksh’000
|
Ksh’000
|
|
PPE
|
12,000
|
|
1/10
|
1,200
|
|
|
Sales
|
|
48,000
|
1/12
|
|
4,000
|
|
Goods from head office
|
15,000
|
|
1/12
|
1,250
|
|
|
Purchases in Tanzania
|
15,000
|
|
1/12
|
1,250
|
|
|
Expenses
|
17,700
|
|
1/12
|
1,475
|
|
|
Receivables and Payables
|
2,000
|
1,000
|
1/10
|
200
|
100
|
|
Cash at bank
|
2,000
|
|
1/10
|
200
|
|
|
Remittances to Kenya
|
19,500
|
|
ACT
|
1,650
|
|
|
Head office current a/c
|
|
34,500
|
ACT
|
|
2,300
|
|
Closing inventory (for balance sheet0
|
6,000
|
|
1/10
|
600
|
|
|
Closing inventory (for trading a/c)
|
|
6,000
|
1/12
|
|
500
|
|
Depreciation expense (P&L )
|
1,200
|
|
1/12
|
100
|
|
|
Provision for depreciation (balance sheet)
|
|
1,200
|
1/10
|
|
120
|
|
Accrued expenses (balance sheet)
|
|
1,500
|
1/10
|
|
150
|
|
Prepaid expenses (balance sheet)
|
1,800
|
_____
|
1/10
|
180
|
_____
|
|
|
92,200
|
92,200
|
|
8,105
|
7,170
|
|
Exchange gain
|
|
|
|
____
|
_935
|
|
|
|
|
|
8,105
|
8,105
|
Arusha Branch
Income statement for the year to 31 December X2 (functional currency method)
|
|
Tsh’000
|
Tsh’000
|
Ksh’000
|
Ksh’000
|
|
Sales
|
|
48,000
|
|
4,000
|
|
Cost of sales:
|
|
|
|
|
|
- Goods from head office
|
15,000
|
|
1,000
|
|
|
- Purchases
|
15,000
|
|
1,250
|
|
|
|
30,000
|
|
2,250
|
|
|
Less closing inventory
|
(6,000)
|
|
(400)
|
|
|
|
|
(24,000)
|
|
(1,850)
|
|
Gross profit
|
|
24,000
|
|
2,150
|
|
Exchange gain
|
|
-
|
|
205
|
|
|
|
24,000
|
|
2,355
|
|
Expenses
|
|
|
|
|
|
General expenses
|
17,700
|
|
1,475
|
|
|
Depreciation
|
1,200
|
|
80
|
|
|
|
|
(18,900)
|
|
(1,555)
|
|
Net profit
|
|
5,100
|
|
800
|
Arusha Branch
Income statement for the year to 31 December X2 (Presentation method)
|
|
Tsh’000
|
Tsh’000
|
Ksh’000
|
Ksh’000
|
|
Sales
|
|
48,000
|
|
4,000
|
|
Cost of sales:
|
|
|
|
|
|
- Goods from head office
|
15,000
|
|
1,250
|
|
|
- Purchases
|
15,000
|
|
1,250
|
|
|
|
30,000
|
|
2,500
|
|
|
Less closing inventory
|
(6,000)
|
|
(500)
|
|
|
|
|
(24,000)
|
|
(2,000)
|
|
Gross profit
|
|
24,000
|
|
2,000
|
|
Expenses
|
|
|
|
|
|
General expenses
|
17,700
|
|
1,475
|
|
|
Depreciation
|
1,200
|
|
100
|
|
|
|
|
(18,900)
|
|
(1,575)
|
|
Net profit
|
|
5,100
|
|
425
|
Arusha Branch
Balance sheet as at 31 December X2 (Functional method)
|
|
Tsh’000
|
Tsh’000
|
Ksh’000
|
Ksh’000
|
ASSETS
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Property plant and equipment
|
|
10,800
|
|
720
|
Current Assets
|
|
|
|
|
|
Inventory s
|
6,000
|
|
400
|
|
|
Receivables
|
2,000
|
|
200
|
|
|
Prepayments
|
1,800
|
|
180
|
|
|
Bank
|
2,000
|
|
200
|
|
|
|
|
11,800
|
|
980
|
|
|
|
22,600
|
|
1,700
|
CAPITAL AND LIABILITIES
|
|
|
|
|
|
Head office current a/c
|
|
20,100
|
|
1,450
|
Current liabilities
|
|
|
|
|
|
Payables
|
1,000
|
|
100
|
|
|
Accruals
|
1,500
|
|
150
|
|
|
|
|
2,500
|
|
250
|
|
|
|
22,600
|
|
1,700
|
Head Office Current A/C (In Branch Books): Functional currency method
|
|
Tsh’000
|
Ksh’000
|
|
Tsh’000
|
Ksh’000
|
|
|
|
|
GFHO
|
15,000
|
1,000
|
|
|
|
|
Fixed Assets
|
12,000
|
800
|
|
Bal c/d
|
34,500
|
2,300
|
Cash
|
7,500
|
500
|
|
|
34,500
|
2,300
|
|
34,500
|
2,300
|
|
Remittance
|
19,500
|
1,650
|
Bal b/d
|
34,500
|
2,300
|
|
Bal c/d
|
20,100
|
1,450
|
Branch profit
|
5,100
|
800
|
|
|
39,600
|
3,100
|
|
39,600
|
3,100
|
Arusha Branch
Balance Sheet as at 31 December X2 (Presentation method)
|
|
Tsh’000
|
Tsh’000
|
Ksh’000
|
Ksh’000
|
ASSETS
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Property plant and equipment
|
|
10,800
|
|
1,080
|
Current Assets
|
|
|
|
|
|
Inventory
|
6,000
|
|
600
|
|
|
Receivables
|
2,000
|
|
200
|
|
|
Prepayments
|
1,800
|
|
180
|
|
|
Bank
|
2,000
|
|
200
|
|
|
|
|
11,800
|
|
1,180
|
|
|
|
22,600
|
|
2,260
|
EQUITY AND LIABILITIES
|
|
|
|
|
|
Head office current a/c
|
|
20,100
|
|
2,010
|
Current liabilities
|
|
|
|
|
|
Payables
|
1,000
|
|
100
|
|
|
Accruals
|
1,500
|
|
150
|
|
|
|
|
2,500
|
|
250
|
|
|
|
22,600
|
|
2,260
|
Head Office Current A/C (in branch books):
|
|
Tsh’000
|
Ksh’000
|
|
Tsh’000
|
Ksh’000
|
|
|
|
|
GFHO
|
15,000
|
1,000
|
|
|
|
|
PPE
|
12,000
|
800
|
|
Bal c/d
|
34,500
|
2,300
|
Cash
|
7,500
|
500
|
|
|
34,500
|
2,300
|
|
34,500
|
2,300
|
|
Remittance
|
19,500
|
1,650
|
Bal b/d
|
34,500
|
2,300
|
|
|
|
|
Branch profit
|
5,100
|
425
|
|
Bal c/d
|
20,100
|
2,010
|
Exchange gain
|
-
|
935
|
|
|
39,600
|
3,660
|
|
39,600
|
3,660
|