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
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.
- A Statement of Affairs as at
W Soja Statement of Affairs as at 31 March 20X3
|Motor Van||6 400|
|Less Current Liabilities|
|Trade Creditors||7 100|
|Add Net Profit||D||
|Less Drawings||B||(20 870)|
NB The Profit Figure is calculated by inserting the missing figure. The order of calculation is from A-D.
- 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.
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