Steve jobs commenced his business of making furniture on 1 April 2000. Due to his limited accounting knowledge he has not maintained proper books of account. You have been engaged to examine his records and prepare appropriate accounts there from. You perform an examination of the records and from interviews with Kimeu you ascertain the following information.
At the commencement of business on 1 April 2000, he deposited Sh 1,200,000 into business bank account. On the same day he brought into the firm his pickup and estimated that it was worth Sh 660,000 and then that from 1 April 2000 it will have useful life of three years.
To increase his working capital he borrowed Sh 400,000 at 15% interest per annum on 1 July 2000 from his sister but no interest has yet been paid.
On 1 April 2000, Sally was employed as a clerk at a salary of Sh. 720,000 per annum.
He had drawn Sh 18,000 per week from the business account for private use during the year.
He purchased timber worth Sh 1,960,000 out of which Sh 158,000 worth of stock was retained in the workshop on 31 March 2001. He also spent Sh 960,000 on the purchase of some equipment at the commencement of the business which he estimates will last him five years.
Electricity bills received up to 31 January 2001 were Sh 240,000. Bills for the remaining two months were estimated to be Sh 48,000. Motor vehicle expenses were Sh 182,000 while general expenses amounted to Sh 270,000 for the year. Insurance premium for the year to 30 June 2001 was Sh 160,000. All these expenses have been paid by cheque.
Rates for the year to June 2001 were Sh 36,000 but these had not been paid.
Sally sent out invoices to customers for Sh 6,178,000 but only Sh 5,080,000 had been received by 31 March 2001. Debt totaling to Sh 17,000 were abandoned during the year as bad. Other customers for jobs too small to invoice have paid Sh 726,000 in cash for work done of which Sh 560,000 was banked. Kimeu used Sh 75,000 of the difference to pay for his family's foodstuff, bought Kenya Charity Sweepstake tickets worth 24,000 and Sally used the rest on general expenses except for Sh 30,100 which was left in the office on 31 March 2001.
You agree with Kimeu that he will pay you Sh 55,000 for accountancy fee.
Required:
(a) Profit and loss account for the year ended 31 March 2001.
(b) Balance sheet as at 31 March 2001.