problem 1) Part A
Malcolm was in business as the import merchant and the following balances were extracted from his books on 31st December 2003:
1. Stock at 31st December 2002 was valued at Rs. 17,920.
2. Motor Vehicles are to be depreciated by 20 %.
3. Interest on loan by Donald is at the rate of 12 % per annum and has been paid to 30 September 2003.
4. A provision for doubtful debts at 5% of debtors is to be made.
5. One quarter of the wages was for staff employed in re-packaging the goods for sale.
6. Rates amounting to Rs.800 has been paid in advance for the year 2003.
(a) Prepare the Trading Account and the Profit and Loss Account for the year ended 31st December 2003
(b) Create the Balance Sheet as at 31st December 2003.
(c) Identify 4 User’s of financial statements and briefly describe their information needs.
The following two paragraphs were included in the auditor’s report of Blue Marlin Company limited:
“The accounts have been prepared on a going concern basis and the validity of this depends on the company’s bankers who are continuing to support by providing adequate overdraft facilities”.
“Because of the materiality of the matters referred to in the previous paragraph we are unable to form an opinion as to whether the accounts give a true and a fair view of the state of affairs of the company:
Describe the following terms
i. Going concern basis