Prepare Ternan plc’s Appropriation Account and Balance Sheet using
the above information

2. Ternan plc provided the following financial information as at 31 March 2013
after the Trading, Profit and Loss Accounts have been prepared.
£000
Net Profit 56
Equipment 230
VAT (CR) 16
Unappropriated Profit at 1 April 2012 28
Debtors 40
Interim Preference Dividend 2
Creditors 22
5% Debentures 20
Stock at 31 March 2013 130
Bank 50
Issued Share Capital:
10% Preference Shares (80,000) 80
Ordinary Shares (200,000) 200
Provision for Bad Debts 6
Insurance prepaid 8
Provision for Depreciation of Equipment 26
Rent Owing 5
Debenture Interest due 1
The Board of Directors proposed that:
• an Ordinary Share dividend of 4% is to be paid in full
• the Preference Share dividend is to be paid in full
(a) Prepare Ternan plc’s Appropriation Account and Balance Sheet using
the above information.
(b) Ternan plc offers Trade and Cash Discounts. Explain one benefit of
each to the company.
(c) Explain the difference between Bad Debts and Provision for Bad Debts.
(d) A profitable business can suffer liquidity problems. Suggest 2 reasons
why this could arise.

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