6 SERVICE ACCOUNTS


Question 4 On 01/01/2012, Paulo’s Painters, a painter and decorating service, had the following assets and liabilities: motor vans €90,000, stock of painting and decorating materials €25,000, rent due €5,000, investment interest due €150, debtors from contracts €5,000, 3 months motor insurance prepaid €250, creditors for painting and decorating materials €2,500, 3% loan €30,000, capital €150,000, reserves €71,900. Fixed assets are given at cost and depreciation on them has been accumulated for two years.


The following is the Receipts and Payments Account for Paulo’s Painters: Receipts


€ Bank (01/01/2012)


5% Investment Interest Receipts from Contracts Motor Van (Cost 25,000)


Payments


25,000 Purchases of Materials 7,650


Painting Equipment 80,500 General Expenses


14,500 Motor Van Insurance per annum


Repayment of Loan 31/09/2012


Drawings Balance (31/12/2012) Balance


127,650 37,650


€


25,000 10,000 35,000


8,000


10,000 2,000


37,650 127,650


Paulo’s Painters also made the following information available to his accountants on the 31/12/2012: • Closing stock of materials on 31/12/2012was €5,000. • Rent due forwarehouse amounted to €1,000. • During the year Paulo used €10,000worth of materials to decorate his private duplex apartment.


• The bank figure did not include a dishonoured cheque of €500 that Paulo received from a client. However, this client has since been declared bankrupt.


• Motor vans depreciation is to be provided at 20% of cost, and no depreciation in year of disposal, whilst equipment owned on 31/12/2012 is to be depreciated at 10%.


6


• Debtors from contracts in arrears amounted to €2,000 and creditors for supplies on 31/12/2012 amounted to €1,500.


You are required to: (a) Prepare a Profit and Loss Account for the year ended 31/12/2012. (b) Prepare a Balance Sheet as at 31/12/2012.


Calculate accumulated depreciation on 01/01/2012 and include in the Balance Sheet.


74


TIP


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