Theory question 107
Incomplete RecordsWale started business on 1st January, 2022 with D 100,000 as capital and kept few records. His assets and liabilities as at 31st December, 2022 were as follows:
Premises D 280,000
Loan D 150,000
Stock D 62,000
Debtors D 4,800
Creditors D 13,200
Bank D 12,400
Wale withdrew D 17,300 cash for his personal use and deposited an additional cash of D 8,000 into the business account.
You are required to:
(a) Calculate the Closing Capital;
(b) Prepare Statement of Net Profit for the year ended 31st December, 2022;
(c) Prepare the Balance Sheet as at that date.
Show the model answer
(a) Closing capital = assets (280,000 + 62,000 + 4,800 + 12,400 = 359,200) − liabilities (150,000 + 13,200 = 163,200) = D 196,000.
(b) Statement of net profit: closing capital 196,000 + drawings 17,300 = 213,300 − additional capital 8,000 = 205,300 − opening capital 100,000 = net profit D 105,300.
(c) Balance Sheet as at 31 December 2022 (D):
Fixed asset: premises 280,000
Current assets: stock 62,000; debtors 4,800; bank 12,400 = 79,200
Less current liabilities: creditors 13,200; working capital 66,000
Total 346,000 less loan 150,000 = 196,000
Capital: opening 100,000 + additional 8,000 + net profit 105,300 = 213,300 − drawings 17,300 = 196,000
Profit = change in capital, adding back drawings and taking out new capital.