Answer to Accounting Test No IR3 On Incomplete Records

October 8th, 2008 Comments off
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The steps are:

 (a)  from the question, inserts all the figures for both assets and liabilities and use the the capital at the end of financial year 2 to balance the Statement Of Affairs.

(b)   after (a),use the simple formulae to compute the Net profit which is =(closing capital + drawings) minus (opening capital + additional capital

 

ANSWER To Accounting Question No. IR3 On INCOMPLETE RECORDS

 

(a)    Prepare Jim’s Statement Of Affairs as at 31 st March Year 2 and the balancing figure is the capital.

 

 

Jim

Statement Of Affairs as at 31 st March Year 2

 

$

$

$

Fixed Assets

 

 

 

Motor car at valuation

 

 

2,800

Fixtures & fittings

 

 

3,600

 

 

 

6,400

Current Assets

 

 

 

Closing stock

 

3,195

 

Debtors

 

2,180

 

Rates prepaid

 

360

 

Cash in hand

 

190

 

 

 

5,925

 

 

 

 

 

Less: Current Liabilities

 

 

 

Creditors

1,310

 

 

Wages accrued due

470

 

 

Interest on loan accrued

150

 

 

Bank overdraft

1,420

3,350

 

Working Capital

 

 

2,575

Net Worth

 

 

8,975

Financed by:

 

 

 

CAPITAL (BALANCING FIGURE

 

 

5,975

Add: Long term liabilities

 

 

 

10% Loan from Johnny

 

 

3,000

 

 

 

8,975

 

 

(b) Compute Opening capital & Net profit for Year 2

 

Calculation Of Opening Capital at 1 April Year 1

$

Motor car at cost

3,500

Bank balance

5,000

Opening capital

8,500

Calculation of Net Profit Using the Net Difference between Closing and Opening Capital:

Formula:

Net Profit

= (Closing Capital + Drawings)-(Opening Capital + Additional Capital)

= ($5,975+$3,200+$8,150)-($8,500+$0)

=$17,325-$8,500

= $8,825

 

 

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