1. **Problem Statement:** Prepare the Manufacturing, Trading, Profit and Loss Account for the year ended 31 October 1999 and the Balance Sheet as at 31 October 1999 for AZ Limited using the provided trial balance and notes. 2. **Key Formulas and Rules:** - **Manufacturing Account:** Calculates the cost of goods manufactured. - **Trading Account:** Calculates gross profit by comparing sales and cost of goods sold. - **Profit and Loss Account:** Calculates net profit by adjusting gross profit with expenses and incomes. - **Balance Sheet:** Shows financial position by listing assets, liabilities, and equity. - Depreciation is on straight-line basis: 10% for furniture/equipment and plant/machinery, 25% for motor vehicles. - Dividend is 10% on issued share capital. - Transfer to general reserve is Sh. 2,000,000. - Debenture interest and overdraft interest are accrued but not yet paid. 3. **Step 1: Calculate Closing Stock Totals** - Finished goods: Sh. 1,175,000 - Raw materials: Sh. 1,000,000 - Work-in-progress: Sh. 2,855,000 - Total closing stock = 1,175,000 + 1,000,000 + 2,855,000 = Sh. 5,030,000 4. **Step 2: Calculate Depreciation** - Motor vehicles: 25% of 560,000 = Sh. 140,000 - Plant and machinery: 10% of 8,900,000 = Sh. 890,000 - Furniture and equipment: 10% of 1,350,000 = Sh. 135,000 5. **Step 3: Manufacturing Account** - Opening raw materials: Sh. 395,000 - Add: Purchases of raw materials: Sh. 40,000,000 - Less: Closing raw materials: Sh. 1,000,000 - Raw materials consumed = 395,000 + 40,000,000 - 1,000,000 = Sh. 39,395,000 - Add: Direct wages: Sh. 5,000,000 - Add: Direct expenses: Sh. 10,000,000 - Add: Factory expenses: Sh. 5,500,000 - Add: Indirect materials: Sh. 3,400,000 - Add: Factory insurance: Sh. 6,300,000 - Add: Depreciation on plant and machinery: Sh. 890,000 - Total manufacturing cost = Sum above = Sh. 70,485,000 - Add: Opening work-in-progress: Sh. 290,000 - Less: Closing work-in-progress: Sh. 2,855,000 - Cost of goods manufactured = 70,485,000 + 290,000 - 2,855,000 = Sh. 67,920,000 6. **Step 4: Trading Account** - Opening finished goods: Sh. 350,000 - Add: Cost of goods manufactured: Sh. 67,920,000 - Less: Closing finished goods: Sh. 1,175,000 - Cost of goods sold = 350,000 + 67,920,000 - 1,175,000 = Sh. 67,095,000 - Sales of finished goods: Sh. 28,550,000 - Gross profit = Sales - Cost of goods sold = 28,550,000 - 67,095,000 = -38,545,000 (loss) 7. **Step 5: Profit and Loss Account** - Add: Gross loss: Sh. 38,545,000 - Add: Office salaries and wages: Sh. 1,175,000 - Add: Sales room expenses: Sh. 640,000 - Add: Administration expenses: Sh. 966,100 - Add: Vehicles running expenses: Sh. 185,000 - Add: Bad debts written-off: Sh. 100,000 - Add: Depreciation on furniture and equipment: Sh. 135,000 - Add: Debenture interest (8% of 30,000,000) = Sh. 2,400,000 - Add: Overdraft interest: Sh. 725,000 - Total expenses = Sum above = Sh. 44,866,100 - Net loss = Gross loss + Expenses = 38,545,000 + 44,866,100 = Sh. 83,411,100 8. **Step 6: Balance Sheet** - Assets: - Motor vehicles (cost - depreciation): 560,000 - 140,000 = 420,000 - Plant and machinery (cost - depreciation): 8,900,000 - 890,000 = 8,010,000 - Furniture and equipment (cost - depreciation): 1,350,000 - 135,000 = 1,215,000 - Land and buildings: 9,500,000 - Closing stock total: 5,030,000 - Trade debtors: 1,350,000 - Bank overdraft (liability): -1,175,000 - Liabilities: - Share capital: 16,500,000 - Share premium: 25,800,000 - 8% debenture stock: 30,000,000 - Trade creditors: 840,000 - Accrued salaries (assumed from notes): 290,000 - General reserve: 2,000,000 - Profit and loss (net loss): -83,411,100 9. **Step 7: Dividend and Reserves** - Dividend = 10% of issued share capital = 10% of 16,500,000 = 1,650,000 - Transfer to general reserve = 2,000,000 **Final answers:** - Manufacturing, Trading, Profit and Loss Account shows a net loss of Sh. 83,411,100. - Balance Sheet lists assets and liabilities as calculated above. Note: The large loss suggests a possible data or interpretation issue; verify figures carefully in practice.