Principles of Accounting: Statement of Affairs Example

• We have explained what a Statement of Affairs is
• Now we will look at an example of how to prepare a Statement of Affairs

Question

W Soja started his business on 1 April 20X2 with $35,000 in a bank account. Unfortunately
he did not keep proper books of account.He is forced to submit a calculation of profit for the year ended 31 March 20X3 to the ZIMRA. He ascertains that at 31 March 20X2 he had:

• stock valued at cost $6,200,
• a van which had cost $6,400 during the year and which had depreciated during the year by $1,600,
• debtors of $15,200, expenses prepaid of $310,
• a bank balance of $33,490,
• a cash balance $270,
• trade creditors $7,100,
• and expenses owing $640
• His drawings were: cash $400 per week for 50 weeks,
• cheque payments $870.

Required:

1. A Statement of Affairs as at

Solution

W Soja Statement of Affairs as at 31 March 20X3

NB The Profit Figure is calculated by inserting the missing figure. The order of calculation is from A-D.

First:

1. This is the balancing figure from the Asset side of the Statement of Affairs i.e. Assets-Current Liabilities. Logic dictates both sides must be equal so the balancing amount is inserted on this side too.
2. From the question data above Soja took $400 cash every week for 50 weeks i.e. $400 x 50 which yields $20 000 in cash drawings throughout the trading period plus a one off cheque payment of $870 giving a total of $20 870
3. Obtained from adding A (52 530)+B(20 870) = 73 400 i.e. $73 400
4. Balancing figure we know Profit + 35 000 = 73 400 making profit the subject of the formula we get Profit = 73 400-35 000 i.e. $38 400

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