Waseem had the following assets, liabilities and capital on 1 April 20–6:
                                                              $
Premises .................................   100,000
Machinery .................................. 48,000
Fixtures ......................................   8,800
Cash ......................................            590
Cash at bank ................................3,320
Trade receivables ........................4,130
Inventory ......................................5,140
Trade payables ............................4,980
Capital ......................................165,000

a. Explain the meaning of each of the terms ‘assets’, ‘liabilities’ and ‘capital’.

b. State why the assets are always equal to the total of the liabilities and capital.

c. Complete the following table to state the effect of each transaction which took place on 2 April 20–6. The first one has been completed as an example. If the transaction does not affect the assets or liabilities write ‘no effect’.

d. Prepare the statement of financial position on 2 April 20–6 after these transactions have taken place.

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Transaction Effect on assets $ Effect on liabilities + 10000 Loan Obtained a loan, $10000, from AB Finance Bank + 10000 Bought goods for resale, $500, for cash Paid a credit supplier $2 100 by cheque Bought machinery, $4000, and paid by cheque Sold out of date goods at cost price, $190, on credit