Kelly started in business as a wholesale stationer on 1 January 19x3. She paid into a business bank account £200,000 as the initial capital of the business.
By 31 December 19x3 the business had made a net profit of £24,000.
At 31 December 19x3 the following assets and liabilities were recorded
in the accounting records of the business.
£
Stocks of stationery
70,000
Premises
120,000
Bank overdraft
7,000
Loan from Uncle Fred due for re-payment 46,000
Fixtures and fittings
30,000
Cash in hand
2,000
Owing to creditors
8,000
Delivery vans
48,000
Owed by debtors
15,000
Required:
(a)Classify the items listed above into:
Fixed Assets
Current Assets
Current Liabilities
Long-term liabilities.
(b)Prepare a balance sheet as at 31 December 19x3 grouping the items into their proper classifications.
(c)State what the effect on the balance sheet would be if the proprietor withdrew cash of £15,000 for her own personal use.
Answer to testing your understanding 4
Fixed Assets
Premises
120
Fixtures and Fittings
30
Delivery Vans
48
198
Current Assets
Stock of Stationery
70
Debtors
15
Cash in Hand
2
87
Current Liabilities
Creditors
8
Bank Overdraft
7 (15)
72
270
Long Term Liability
Loan from Uncle Fred
(46)
224
===
Financed by:
Capital at 1 January 19x3
200
Add Net Profit
24
224
===
(c)Reduce Bank and Capital