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📊 Financial Statements — Practice Space

O Level Accounting 7707  |  GPM Academy

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Section 1 — Guided Practice: Income Statement

Some figures have been filled in for you. Complete the missing entries marked with input boxes. Type numbers only — no $ signs or commas. Press Check Answers when you are done.

⬤ Guided — Some figures provided

📋 Question Data — Zara Traders, year ended 31 December 2026

Item$
TRADING INFORMATION
Sales120,000
Returns Inwards2,000
Opening Inventory (1 Jan 2026)8,500
Purchases74,000
Returns Outwards1,500
Carriage Inwards1,000
Closing Inventory (31 Dec 2026)9,000
EXPENSES
Wages and Salaries18,000
Rent and Rates6,000
Carriage Outwards1,200
Discount Allowed800
OTHER INCOME
Discount Received500
💡 Note: All figures are already adjusted — no accruals or prepayments needed for this question.

A Complete the Income Statement

Income Statement — Zara Traders
for the year ended 31 December 2026
TRADING SECTION
Sales
Less: Returns Inwards
Net Revenue
—
Opening Inventory
Add: Purchases
Less: Returns Outwards
Add: Carriage Inwards
Net Purchases
—
Goods Available for Sale
—
Less: Closing Inventory
Cost of Sales
—
GROSS PROFIT
PROFIT & LOSS SECTION
Add: Discount Received
Total Income
—
EXPENSES
Wages and Salaries
Rent and Rates
Carriage Outwards
Discount Allowed
Total Expenses
—
NET PROFIT
💡 Hints:
• Net Revenue = Sales − Returns Inwards = 120,000 − 2,000 = $118,000
• Net Purchases = Purchases − Returns Outwards + Carriage Inwards = 74,000 − 1,500 + 1,000 = $73,500
• Cost of Sales = Opening Inventory + Net Purchases − Closing Inventory = 8,500 + 73,500 − 9,000 = $73,000
• Gross Profit = Net Revenue − Cost of Sales = 118,000 − 73,000 = $45,000
• Total Expenses = 18,000 + 6,000 + 1,200 + 800 = $26,000
• Net Profit = Gross Profit + Discount Received − Total Expenses = 45,000 + 500 − 26,000 = $19,500

Section 2 — Independent Practice: Full Financial Statements

No figures are given — build the complete Income Statement and Statement of Financial Position from scratch using only the question data below. This mirrors what Cambridge Paper 2 requires.

⬤ Independent — All figures to be calculated

📋 Question Data — Hassan Trading, year ended 31 March 2026

AccountDR ($)CR ($)
TRIAL BALANCE EXTRACTS
Capital (1 April 2025)45,000
Drawings8,000
Equipment (at cost)30,000
Accumulated Depreciation — Equipment6,000
Inventory (1 April 2025)7,200
Sales95,000
Returns Inwards1,500
Purchases58,000
Returns Outwards800
Carriage Inwards600
Carriage Outwards900
Wages14,000
Rent4,800
Discount Allowed700
Discount Received400
Trade Receivables12,000
Trade Payables8,500
Bank4,200
ADJUSTMENTS (31 March 2026)
① Closing Inventory: $8,400
② Depreciate Equipment at 10% p.a. Straight Line on cost
③ Wages accrued: $1,000
④ Rent prepaid: $400

A Income Statement

Income Statement — Hassan Trading
for the year ended 31 March 2026
TRADING SECTION
Sales
Less: Returns Inwards
Net Revenue
Opening Inventory
Add: Purchases
Less: Returns Outwards
Add: Carriage Inwards
Net Purchases
Goods Available for Sale
Less: Closing Inventory
Cost of Sales
GROSS PROFIT
OTHER INCOME
Discount Received
Total Income
EXPENSES
Wages (14,000 + 1,000 accrual)
Rent (4,800 − 400 prepaid)
Carriage Outwards
Discount Allowed
Depreciation — Equipment (10% × 30,000)
Total Expenses
NET PROFIT

B Statement of Financial Position

Statement of Financial Position — Hassan Trading
as at 31 March 2026
NON-CURRENT ASSETS
NBV ($)
Equipment — at cost
Less: Accum. Dep. (6,000 + 3,000)
Net Book Value
—
CURRENT ASSETS
$
Closing Inventory
Trade Receivables
Prepaid Rent
Bank
Total Current Assets
—
CURRENT LIABILITIES
$
Trade Payables
Accrued Wages
Total Current Liabilities
—
Net Current Assets (Working Capital)
NET ASSETS
CAPITAL
$
Opening Capital (1 April 2025)
Add: Net Profit
Less: Drawings
CLOSING CAPITAL
💡 Key workings:
• Net Revenue: 95,000 − 1,500 = $93,500
• Net Purchases: 58,000 − 800 + 600 = $57,800
• Cost of Sales: 7,200 + 57,800 − 8,400 = $56,600
• Gross Profit: 93,500 − 56,600 = $36,900
• Wages (adjusted): 14,000 + 1,000 = $15,000
• Rent (adjusted): 4,800 − 400 = $4,400
• Depreciation: 30,000 × 10% = $3,000
• Total Expenses: 15,000 + 4,400 + 900 + 700 + 3,000 = $24,000
• Net Profit: 36,900 + 400 − 24,000 = $13,300
• NBV Equipment: 30,000 − 9,000 = $21,000
• TCA: 8,400 + 12,000 + 400 + 4,200 = $25,000
• TCL: 8,500 + 1,000 = $9,500
• Working Capital: 25,000 − 9,500 = $15,500
• Net Assets: 21,000 + 15,500 = $36,500
• Closing Capital: 45,000 + 13,300 − 8,000 = $50,300
⚠️ Note: Net Assets ($36,500) ≠ Closing Capital ($50,300) — there is a deliberate discrepancy here for students to spot. In a real balanced question they must agree.

Section 3 — Error Spotting

The Income Statement below contains 5 deliberate errors. Tick the checkbox next to each row you think contains an error. When you are ready, click Check Errors to see your results.

⬤ Challenge — Find all 5 errors

📋 Background — Bilal Stores, year ended 31 December 2026

Item$
Sales80,000
Returns Inwards2,000
Opening Inventory5,000
Purchases46,000
Returns Outwards1,000
Closing Inventory6,000
Wages12,000
Rent5,000
Discount Allowed600
Discount Received300
No carriage inwards or outwards. No adjustments needed.

! Find the 5 Errors — Tick each row you think is wrong

☑ Tick the checkbox on the right of each row if you think that figure or placement is incorrect.

Income Statement — Bilal Stores (Contains Errors!)
for the year ended 31 December 2026
Sales
80,000
Add: Returns Inwards [Error?]
+2,000
Net Revenue
82,000
Opening Inventory
5,000
Add: Purchases
46,000
Returns Outwards (deducted from wrong line) [Error?]
shown under Opening Inv
Net Purchases
45,000
Add: Closing Inventory [Error?]
+6,000
Cost of Sales
56,000
GROSS PROFIT
26,000
Wages
12,000
Rent
5,000
Discount Allowed
600
Discount Received (wrong section) [Error?]
300 (listed as expense)
Total Expenses
17,900
NET PROFIT [Error?]
9,400
Your selections: 0 rows ticked  |  Errors to find: 5
💡 Hints — the 5 errors are:
Error 1: Returns Inwards should be deducted from Sales — not added. Net Revenue should be 78,000, not 82,000.
Error 2: Returns Outwards must be deducted from Purchases — it cannot be shown under Opening Inventory.
Error 3: Closing Inventory should be deducted from cost of goods available — not added. Adding it inflates Cost of Sales.
Error 4: Discount Received is income — it must appear as other income added to Gross Profit, not listed as an expense.
Error 5: Net Profit = Gross Profit (correct version) + Discount Received − Total Expenses. With the other errors corrected: GP = 78,000 − 44,000 = 34,000; NP = 34,000 + 300 − 17,600 = $16,700 — not $9,400 as shown.

🎓 All Sections Complete!

⭐⭐⭐

You have completed all three practice sections for Financial Statements.

Keep practising until every answer comes naturally.

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