ZIMSEC O Level Principles of Accounting: Single entry and Incomplete records: 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:
- A Statement of Affairs as at
Solution
W Soja Statement of Affairs as at 31 March 20X3
| $ | $ | ||
| Non-Current Assets | |||
| Motor Van | 6 400 | ||
| Less Depreciation | (1 600) | ||
| 4800 | |||
| Current Assets | |||
| Stock | 6 200 | ||
| Debtors | 15 200 | ||
| Prepaid Expenses | 310 | ||
| Bank | 33 490 | ||
| Cash | 270 | ||
| 55 470 | |||
| Less Current Liabilities | |||
| Trade Creditors | 7 100 | ||
| Accrued Expenses | 640 | ||
(7 740) | |||
| 47 730 | |||
52 530 |
|||
| Capital | 35 000 | ||
| Add Net Profit | D | 38 400 |
|
| C | 73 400 | ||
| Less Drawings | B | (20 870) | |
| A | 52 530 |
NB The Profit Figure is calculated by inserting the missing figure. The order of calculation is from A-D.
First:
- 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.
- 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
- Obtained from adding A (52 530)+B(20 870) = 73 400 i.e. $73 400
- 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
To access more topics go to the Principles of Accounting Notes.
