Principles of Accounting: Statement of Affairs Example

////Principles of Accounting: Statement of Affairs Example

Principles of Accounting: Statement of Affairs Example

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:

  1. A Statement of Affairs as at

Solution

W Soja Statement of Affairs as at 31 March 20X3

$$
Non-Current Assets
Motor Van6 400
Less Depreciation

(1 600)

4800
Current Assets
Stock6 200
Debtors15 200
Prepaid Expenses310
Bank33 490
Cash

270

55 470
Less Current Liabilities
Trade Creditors7 100
Accrued Expenses

640

(7 740)

47 730

52 530

Capital35 000
Add Net ProfitD

38 400

C73 400
Less DrawingsB(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:

  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

To access more topics go to the Principles of Accounting Notes.

 

By |2018-01-25T09:48:31+00:00January 25th, 2018|Notes, Ordinary Level Notes, Principles of Accounts Notes|Comments Off on Principles of Accounting: Statement of Affairs Example

About the Author:

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.
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