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The following is the Trial Balance of Bates Ltd for the Year Ended 30 April 2019

trial balace as on 30th april 2019

	000	000
Ordinary shares (0.10 nominal value)		500
8% Preference Shares		500
B/F Retained Profits		1,300
Revaluation reserve		100
Goodwill	150
Inventory as at 1st May 2018	1,360
Leasehold Office Premises	2,059
Turnover		20,152
Returns	126	186
Salaries and wages administration	1,250
Salaries and wages sales	1,380
Motor expenses	170
General distribution expenses	240
General administration expenses	280
9% debentures		5,200
Debenture interest	88
Office Ground Rent	100
Bad debts written off	120
Discounts	230	410
Plant & Machinery at cost	2,580
Provision for depn. (plant & mach. )		950
Vehicles at cost	796
Provision for depn. (motor vehicles)		228
Trade receivables/ trade payables	1,450	1,290
Trade Investments	3,160
Bank	1,265
Purchases	13,376
Carriage inwards	850
Preference Dividend paid	22
Provision for Bad Debts	236
	31,288	30,816

The following additional information is also available, (ALL NUMBERS ARE IN 000 ):

1. The closing stock at 30 April 2019 was 1,460

2. Depreciation is to be provided on a reducing balance basis for the vehicles at 25% of net book value, and on plant & machinery at 10% of cost on a straight-line basis.

iii) The provision for doubtful debts at 30 April 2019 is to be 10% of trade receivables as at the date.

4. The directors propose that a final Ordinary dividend of 1p per share be provided for.

5. Wages owing at the year-end were as follows:

Administration 130

6. General Admin. Expenses include 20 in respect of prepaid insurance

7. Make provision for corporation tax for the year of 450

8. The outstanding Debenture Interest and Preference Dividend should be provided for.

9. Bates Trade Investments have earned 200 of interest that has not been received.

ix) It has been decided that 100 of the asset of Goodwill should be written off to the Income Statement

Required:

It is one questio only and all are parts , please answer all

1. The book keeper has clearly made an error in drawing up the Trial Balance. She has put one of the balances in the wrong column. Which balance has been entered incorrectly?

2. You are required to prepare an Income Statement for the year ended 30^th April 2019 and a Balance sheet at that date.
3. An old school friend of yours is starting the BABS programme in September 2020. Needless to say he ius concerned about the unusual circumstances and has asked for your advice. He has seen exam questions like these and has asked the questions below. In each case give him an answer that, as a future undergraduate he would understand and will give him comfort to alleviate some of his concerns:
4. When you Google DEBIT and CREDIT, it basically says that DEBIT is bad and CREDIT is good. So, in this example Trade payables, what the business owes its suppliers, is in the CREDIT column. Surely its not good to owe people money?

2. What does Goodwill mean? It sounds like a good thing, why is it the DEBIT column which I thought was bad things?

3. I can see that Bad Debts are customers that have not paid the business and should be written off as a cost. But what is the Provision for Bad debts? 5 marks

4. I know that certain things a business has will go down in value over time. I have heard that cars, for instance, depreciate very quickly. But how can we know by how much, and when? Also, why are there at least two different methods of calculating it, it all sounds very vague.

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