The below question illustrates the preparation of a simple Statement Of Affair (all the assets and liabilities are given with the balancing figure of the capital) and using the net difference of closing and opening capital adjustments to compute the net profit:-
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Jim commenced business on 1 April Year 1 with $5,000 in the business bank account and a motor vehicle at $3,500 which he transferred to the business. He failed to keep ledger accounts. During the year to 31 st March Year 2, Jim drew goods which cost $3,200 for his own personal use and drew cash amounting to $8,150. At 31 st March Year 2, the business assets and liabilities were:
Required: (a) Prepare a Statement Of Affairs to show Jim’s Capital at 31 st March Year 2 (16 marks) (b) Calculate Capital at the start of business and using this figure together with his Capital at end of the financial year, calculate Jim’s profit for the year ended 31 st March Year 2 (9 marks)
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