Sole Trader Accounts

State two reasons why a non-current asset may be depreciated. (2 marks)

Define the term "irrecoverable debt". (2 marks)

State the value at which inventory must be shown in the financial statements and name the accounting concept that requires this treatment. (2 marks)

A machine was purchased on 1 January 2021 for £20 000. Depreciation is provided at 25% per annum using the reducing balance method. The machine has no residual value. Calculate the depreciation charge for Year 3 (year ended 31 December 2023). Show your working. (3 marks)

A delivery van was purchased on 1 January 2023 for £32 000. The estimated useful life is 4 years and the residual value is £4 000. Depreciation is provided using the straight-line method. Calculate the annual depreciation charge for the delivery van. Show your working. (3 marks)

At 31 March 2024, trade receivables totalled £34 600. A specific customer owes £1 200 which is considered doubtful. A general provision of 4% is to be maintained on all remaining trade receivables. The existing provision for doubtful debts in the trial balance is £1 560. Calculate the new provision for doubtful debts and state the income statement entry. Show your working. (4 marks)

At 1 January 2024, the trial balance of Elora Designs showed: During the year, a vehicle that originally cost £11 500 with accumulated depreciation of £6 900 was sold for £3 800. (a) Calculate the profit or loss on disposal of the vehicle. Show your working. (b) State how the profit or loss on disposal would appear in the income statement. (c) State the figures for vehicles that would appear in the statement of financial position after the disposal. (4 marks)

A sole trader withdrew goods from the business valued at £950 for personal use. Explain how goods taken for own use should be treated in: (a) the income statement (b) the statement of financial position Give a reason for each treatment. (4 marks)

A sole trader incorrectly treated a capital expenditure item of £8 000 as revenue expenditure in the income statement for the year ended 30 June 2024. Analyse the impact of this error on the income statement and statement of financial position for the year ended 30 June 2024. (4 marks)

Explain two limitations of using the provision for doubtful debts when assessing the reliability of the trade receivables figure shown in the statement of financial position. (4 marks)

The following information is available for Haruki Trades for the year ended 30 September 2024: Prepare an extract from the income statement to show the cost of sales section. (6 marks)

Explain how each of the following items should be treated in the income statement and statement of financial position of Nadia Supplies for the year ended 31 December 2024: (a) Rent payable accrued £420 (b) Insurance pre-paid £185 (c) Commission receivable owing £260 (6 marks — 2 marks per item)

Lena Bakeries purchased a commercial oven for £18 500. Additional costs relating to the oven were: Depreciation is provided at 20% per annum using the straight-line method. (a) Explain the difference between capital expenditure and revenue expenditure. (b) Identify which of the costs above are capital expenditure and which are revenue expenditure. (c) Calculate the total capital expenditure on the oven and the annual depreciation charge. (6 marks)

Evaluate whether the straight-line or reducing balance method of depreciation is more appropriate for a motor vehicle. Justify your answer. (8 marks)

Using your answer to Question 10 and the trial balance and additional information provided in that question, prepare the statement of financial position for Tomás Rivera at 31 May 2024. Note: the office equipment depreciation figure in the trial balance (£7 200) represents accumulated depreciation from prior years. (10 marks)

Using your answer to Question 12 and the trial balance and additional information provided in that question, prepare the statement of financial position for Priya Fabrics at 28 February 2024. (10 marks)

Omar runs a sole trader business, Omar's Electrical. His most recent financial statements show: Assess the usefulness of the income statement and statement of financial position to Omar as owner of the business. (10 marks)

The following trial balance has been extracted for Simone Croft at 31 October 2024: Additional information at 31 October 2024: - Inventory was valued at £12 580 - Simone took goods from the business for her personal use valued at £900 - Insurance pre-paid £310 - Motor expenses accrued £190 - Commission receivable owing £450 - The provision for doubtful debts is to be maintained at 4% of trade receivables outstanding - Depreciation is provided as follows: - Machinery: 10% per annum, straight-line method - Motor van: 20% per annum, reducing balance method Prepare the income statement for the year ended 31 October 2024 and the statement of financial position at 31 October 2024. Show all workings. (20 marks)