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ANSWER To Accounting Question No IR 2 On Incomplete Records
(a) Jim’s Statement Of Affairs as at 31 st December 2006 & 2007
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2006
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2007
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$
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$
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Fixed Assets
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Premises
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25,000
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25,000
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Machines(W1)
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20,000
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18,500
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Less: Depreciation
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8,000
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12,000
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9,250
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9,250
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37,000
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34,250
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Current Assets
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Stock-Raw Materials
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6,900
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7,790
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Work-in-progress
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5,300
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4,600
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Finished goods
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7,900
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10,050
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Trade Debtors
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12,300
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14,600
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Prepayments
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1,250
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1,500
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33,650
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38,540
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Less:
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Current Liabilities
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Creditors
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4,450
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4,820
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Accrued Expenses
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570
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370
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Bank Overdraft
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5,040
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3,270
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Working Capital
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23,590
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30,080
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Net Worth
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60,590
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64,330
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Financed by:
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Capital(closing)
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60,590
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63,830
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Add:Loan
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–
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500
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60,590
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64,330
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(b) Calculation of net profit for Year 2007
Net profit=(Closing Capital + Drawings)-(Opening Capital + Additional Capital)
=($63,830+$12,000)-($60,590-$10,000)
=$75,830-$70,590
=$5,240
Workings:
W1:
Year 2006:
Depreciation =$20,000 x10% x 4 = $8,000
Year 2007
Depreciation of Machines Account
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2007
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$
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2007
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$
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Dec 31
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Disposal A/c
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600
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Jan 1
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Balance b/d
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8,000
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Balance c/d
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9,250
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Dec 31
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Profit & Loss ($18,500 x10%)
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1,850
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9,850
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9.850
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