Answer to Accounting Test No IR3 On Incomplete Records

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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