QUESTION ONE (a) The International Accounting Standards Board has published a framework for the preparation of financial statements. Required: State the users of financial information and explain their information needs as per the framework (10 marks) (b) The following trial balance was extracted from the books of Mohamed Kagame,a sole trader as at 31 October 2015: C Additional information: 1. Stock in trade as at 31 October 2015 was valued lat Sh.593040. 2. Rates and insurance were prepaid to the extent of sh.2400 and Sh.2820 respectively, as at 31 October 2015. 3. Electricity due as at 31 October 2015 amounted to Sh.6000 4. The provision for doubtful debts is to be adjusted to 5% of the debtors remaining after taking into account that sh.20160 of the debtors were to be regarded as bad. 5. Rent receivec I as at 31 October 2015 was Sh.15000 6. Depreciation has been and is to be charged on motor vehicles at the rate of 20% per annum on the straight line basis.No depreciation is to be charged on premises. 7. In Novembe 2014, a motor vehicle which had been purchased for Sh.160000 on 1 November 2012 was sold for Sh.115000 The only record of this disposal is the entry in the proceeds from sales of motor vehicle account. Required: (i) Income statement for the year ended 31 October 2015. (ii) Statement of financial position for the year ended 31 October 2015. (7 marks)

(a) The users of financial information as per the framework include:<br /><br />1. Investors: They need financial information to make informed decisions about investing in a company or to evaluate the performance of their existing investments.<br />2. Creditors: They require financial information to assess the creditworthiness of a company and determine whether to extend credit or lend money.<br />3. Management: They use financial information for planning, organizing, and controlling the company's operations, as well as for decision-making purposes.<br />4. Employees: They need financial information to understand the company's performance and job security.<br />5. Customers: They may use financial information to assess the stability and long-term viability of a company they are doing business with.<br />6. Government agencies: They require financial information for regulatory and taxation purposes.<br /><br />(b) (i) Income statement for the year ended 31 October 2015:<br /><br />| Account | Debit | Credit |<br />| --- | --- | --- |<br />| Sales | | 15000 |<br />| Cost of Goods Sold | 593040 | |<br />| Gross Profit | | |<br />| Operating Expenses | | |<br />| Depreciation on Motor Vehicles | | |<br />| Interest Expense | | |<br />| Profit before Tax | | |<br />| Tax Expense | | |<br />| Net Profit | | |<br /><br />(ii) Statement of financial position for the year ended 31 October 2015:<br /><br />| Account | Debit | Credit |<br />| --- | --- | --- |<br />| Non-Current Assets | | |<br />| Motor Vehicles | | |<br />| Less: Accumulated Depreciation | | |<br />| Current Assets | | |<br />| Debtors | | |<br />| Less: Provision for Doubtful Debts | | |<br />| Stock in Trade | | 593040 |<br />| Prepaid Expenses | | |<br />| Receivable from Rent | | 15000 |<br />| Cash and Bank | | |<br />| Total Assets | | |<br />| Equity and Liabilities | | |<br />| Capital | | |<br />| Retained Earnings | | |<br />| Total Equity and Liabilities | | |