Skip to content
prinsipperakaunan.com.my
Book a Trial Class

Level: HOTS (KBAT)

HOTS (KBAT) Worked Examples: Financial Statements of a Sole Proprietorship without Adjustments

These six HOTS examples, from easier to harder, train you to classify items, correct errors, derive missing figures, interpret financial position and close accounts (Form 4 Chapter 7, no adjustments).

Book a Trial Class

One-hour paid trial · Same-day reply · from RM50/hr

Example 1: Building the Trading Account with distractor items

Question

Solution plan

The Trading Account computes gross profit. Debit side: opening inventory, purchases, costs of bringing goods in (carriage inwards, import duty) and returns inwards (contra to sales). Credit side: sales, returns outwards (contra to purchases) and closing inventory. Carriage outwards is the cost of delivering goods to customers. It is a Profit and Loss expense, so it is left out here. Gross profit is the balancing figure (c/d).

Trading Account of Kedai Runcit Sri Maju for the year ended 31 December 20X5
ParticularsRMParticularsRM
Opening inventory12,000Sales140,000
Purchases85,000Returns outwards3,000
Carriage inwards2,500Closing inventory15,000
Import duty1,500Returns inwards4,000
Gross profit c/d53,000
158,000158,000

Carriage outwards RM1,800 is deliberately left out because it is a Profit and Loss expense, not a cost of purchases.

Answer

Gross profit = RM53,000. Both sides of the Trading Account total RM158,000. Carriage outwards RM1,800 is excluded because it is a Profit and Loss expense.

Where marks are usually lost

Example 2: Profit and Loss Account: separating income, expenses and drawings

Question

Solution plan

Start with gross profit. Add all INCOME (discount received, commission received). Deduct all operating EXPENSES. Drawings are money or goods the owner takes for private use. They are NOT an expense, so they are deducted from capital, not in the Profit and Loss Account. Net profit = total income - total expenses.

Profit and Loss Account of Perniagaan Kraftangan Melati for the year ended 31 December 20X6
ParticularsRM
Gross profit (from Trading Account)48,000
Add: Income
Discount received1,200
Commission received2,800
Total income52,000
Less: Expenses
Salaries18,000
Rent7,200
Carriage outwards1,500
Discount allowed900
General expenses2,600
Utilities3,300
Interest on loan1,000
Total expenses34,500
Net profit (to Capital Account)17,500

Drawings RM5,000 are deliberately not recorded here because they are deducted from the owner's capital in the Capital Account.

Answer

Total income = RM52,000; total expenses = RM34,500; net profit = RM17,500. Drawings RM5,000 are kept out of the Profit and Loss Account.

Where marks are usually lost

Example 3: Correcting a wrongly prepared Trading Account

Question

Solution plan

Trace each error's effect on gross profit: (i) returns inwards RM5,000 was added to sales instead of deducted, overstating profit by RM10,000; (ii) returns outwards RM2,000 was not deducted, so cost of sales is overstated and profit understated by RM2,000; (iii) carriage outwards RM2,200 was included, so cost of sales is overstated and profit understated by RM2,200. Net effect = +10,000 - 2,000 - 2,200 = +RM5,800. Correct profit = 52,300 - 5,800 = RM46,500.

Clerk's WRONG version (erroneous gross profit RM52,300)
ParticularsRMParticularsRM
Opening inventory8,000Sales (miscalculated +returns inwards)115,000
Purchases (returns outwards not deducted)60,000Closing inventory9,000
Carriage inwards1,500
Carriage outwards (wrongly included)2,200
Gross profit c/d (wrong)52,300
124,000124,000
CORRECT Trading Account of Bengkel Auto Halim for the year ended 31 December 20X7
ParticularsRMParticularsRM
Opening inventory8,000Sales110,000
Purchases60,000Returns outwards2,000
Carriage inwards1,500Closing inventory9,000
Returns inwards5,000
Gross profit c/d46,500
121,000121,000

Carriage outwards RM2,200 is moved to the Profit and Loss Account. Correct gross profit = RM46,500 (not RM52,300).

Answer

Actual gross profit = RM46,500. The clerk overstated profit by RM5,800. Causes: returns inwards added (not deducted), returns outwards not deducted, and carriage outwards wrongly included.

Where marks are usually lost

Example 4: Deriving missing figures from a gross profit percentage

Question

Solution plan

Work step by step from the knowns: (1) Gross profit = 25% x cost of sales. (2) Sales = cost of sales + gross profit. (3) Cost of sales = opening inventory + cost of purchases - closing inventory, so cost of purchases = cost of sales + closing inventory - opening inventory. (4) Cost of purchases = net purchases + carriage inwards, so net purchases = cost of purchases - carriage inwards. (5) Purchases = net purchases + returns outwards.

Working to derive the missing figures
ItemWorkingRM
Gross profit25% x 96,00024,000
Sales96,000 + 24,000120,000
Cost of purchases96,000 + 18,000 - 14,000100,000
Net purchases100,000 - 2,00098,000
Purchases98,000 + 3,000101,000
Trading Account of Kedai Pakaian Seri Wangsa (verification) for the year ended 31 December 20X8
ParticularsRM
Sales120,000
Less: Cost of sales
Opening inventory14,000
Purchases101,000
Less: Returns outwards3,000
Net purchases98,000
Carriage inwards2,000
Cost of purchases100,000
Cost of goods available for sale114,000
Less: Closing inventory18,000
Cost of sales96,000
Gross profit24,000

Check: 24,000 / 96,000 = 25%, which matches the original condition.

Answer

Gross profit = RM24,000; sales = RM120,000; purchases = RM101,000. The reconstructed Trading Account confirms cost of sales of RM96,000 and gross profit of 25% on cost.

Where marks are usually lost

Example 5: Capital Account, Statement of Financial Position and working capital

Question

Solution plan

Capital Account: opening capital (credit) + net profit (credit) - drawings (debit) = closing capital. Statement of Financial Position: arrange non-current assets (building, equipment, vehicle) and current assets (inventory, debtors, bank, cash). Financed by: owner's equity (closing capital) + non-current liabilities (loan) + current liabilities (creditors). Total assets must equal total equity and liabilities. Working capital (current assets - current liabilities) measures liquidity.

Capital Account of Perniagaan Elektrik Damai at 31 December 20X9
ParticularsRMParticularsRM
Drawings12,000Balance b/d (Capital 1 Jan)80,000
Balance c/d93,000Net profit25,000
105,000105,000
Statement of Financial Position of Perniagaan Elektrik Damai as at 31 December 20X9
ParticularsRM
Non-Current Assets
Building60,000
Office equipment15,000
Motor vehicle22,000
Total non-current assets97,000
Current Assets
Closing inventory18,000
Debtors9,000
Bank7,000
Cash1,500
Total current assets35,500
TOTAL ASSETS132,500
Owner's Equity
Closing capital93,000
Non-Current Liabilities
Bank loan24,000
Current Liabilities
Creditors15,500
TOTAL EQUITY AND LIABILITIES132,500

Working capital = current assets RM35,500 - current liabilities RM15,500 = RM20,000 (positive).

Answer

Closing capital = RM93,000. Total assets = total equity and liabilities = RM132,500 (the statement balances). Working capital = RM20,000; the ratio of current assets to current liabilities is more than 2:1, showing the firm can comfortably meet short-term debts.

Where marks are usually lost

Example 6: Closing entries for income, expense and inventory accounts

Question

Solution plan

Nominal accounts (income and expenses) are closed by transferring their balances to the Trading or Profit and Loss Account. Sales is debited and Trading credited; purchases, carriage inwards and returns inwards are debited to Trading (crediting each account); returns outwards the reverse. Opening inventory is transferred to the debit of Trading (crediting Inventory); closing inventory is recorded as a debit to Inventory (crediting Trading), completing the double entry. Expenses (salaries, rent, utilities) go to the debit of Profit and Loss; commission received to its credit. Real accounts (assets/liabilities/capital) are not closed; their balances are carried down (b/d) to the next period.

Closing Journal of Kedai Buku Ilmu Jaya at 31 December 20Y0
ParticularsDebit RMCredit RM
Sales150,000
Trading Account150,000
Trading Account90,000
Purchases90,000
Trading Account3,000
Carriage inwards3,000
Trading Account4,000
Returns inwards4,000
Returns outwards2,000
Trading Account2,000
Trading Account20,000
Inventory Account20,000
Inventory Account25,000
Trading Account25,000
Profit and Loss Account33,600
Salaries24,000
Rent6,000
Utilities3,600
Commission received1,600
Profit and Loss Account1,600
Total329,200329,200
Trading and Profit and Loss Account of Kedai Buku Ilmu Jaya for the year ended 31 December 20Y0
ParticularsRMParticularsRM
Opening inventory20,000Sales150,000
Purchases90,000Returns outwards2,000
Carriage inwards3,000Closing inventory25,000
Returns inwards4,000
Gross profit c/d60,000
177,000177,000
Salaries24,000Gross profit b/d60,000
Rent6,000Commission received1,600
Utilities3,600
Net profit (to Capital Account)28,000
61,60061,600

Gross profit RM60,000 and net profit RM28,000. Real accounts (Motor Vehicle, Bank, Creditors) are not closed; their balances carry forward to the next period.

Answer

The closing journal balances: debit = credit = RM329,200. Gross profit = RM60,000; net profit = RM28,000 (transferred to the Capital Account). Real accounts are not closed because they represent ongoing assets, liabilities and capital; their balances are carried down (balance b/d) as the next period's opening balance, whereas nominal accounts are closed so they start from zero to measure the new period's profit.

Where marks are usually lost

Other sets for this chapter

Back to chapter: Financial Statements of a Sole Proprietorship without Adjustments →

Need help with Financial Statements of a Sole Proprietorship without Adjustments?

One-hour paid trial · Same-day reply · from RM50/hr

Book a Trial Class
Book a Trial Class

One-hour paid trial · Same-day reply