On 1 March, Joe Conday started a new business. During March, he carried out the

Question

On 1 March, Joe Conday started a new business. During March, he carried out the following transactions:
1 March Deposited $20,000 in a newly opened bank account.
2 March Bought fixtures and fittings for $6,000 cash and inventories $8,000 on credit.
3 March Borrowed $5,000 from a relative and deposited it in the bank.
4 March Bought a motor car for $7,000 cash and withdrew $200 in cash for his own use.
5 March A further motor car costing $9,000 was bought. The motor car bought on 4 March was
given in part exchange at a value of $6,500. The balance of purchase price for the new
car was paid in cash.
6 March Conday won $2,000 in a lottery and paid the amount into the business bank account. He
also repaid $1,000 of the borrowings.

Based on the given information, prepare a statement of financial position for the business at the end of
each day.

Explanation / Answer

Notes:

Capital as on March 4 = $20000 - drawings = $20000 - $200 = $19800

Capital as on March 5 = $19800 - Loss on exchange of car = $19800 - (7000 - 6500) = $19300

Capital as on March 6 = $19300 + $2000 = $21300

Loan as on Mar 6 = $5000 - $1000 (repayment) = $4000

Cash on Mar 2 = $20000 - $6000 (furniture fittings) = $14000

Cash on Mar 3 = $14000 + $5000 (loan) = $19000

Cash on Mar 4 = $19000 - $7000 (car) - $200 (drawings) = $11800

Cash on Mar 5 = $11800 - $2500 (payment for new car) = $ 9300

Cash on Mar 6 = $9300 + $2000 (new capital) - $1000 (loan repayment) = $10300

Loss on sale of car = $7500 - $6500 = $500

Cash paid for the new car = $ 9000 - $6500 (excehnge value) = $2500

Balance Sheet at the end of each day Liabilities Assets Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Capital 20000 20000 20000 19800 19300 21300 Cash 20000 14000 19000 11800 9300 10300 Fixtures & fittings 6000 6000 6000 6000 6000 Accounts payable 8000 8000 8000 8000 8000 Inventories 8000 8000 8000 8000 8000 Loan 5000 5000 5000 4000 Car 7000 9000 9000 20000 28000 33000 32800 32300 33300 0 20000 28000 33000 32800 32300 33300

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