The following is a list of assets and claims of a manufacturing business at a particular point in time:

£

Short-term borrowing 22,000 Property 245,000 Inventories of raw materials 18,000 Trade payables 23,000 Plant and equipment 127,000 Loan from Manufacturing Finance Co. (long-term borrowing) 100,000 Inventories of finished goods 28,000 Delivery vans 54,000 Trade receivables 34,000 Required:

Write out a balance sheet in the standard vertical form incorporating these figures. (Hint: There is a missing item that needs to be deduced and inserted.)

You have been talking to someone who had read a few chapters of an accounting text some years ago. During your conversation the person made the following statements:

(a) The income statement shows how much cash has come into and left the business during the accounting period and the resulting balance at the end of the period.

(b) In order to be included in the balance sheet as an asset, an item needs to be worth something in the market – that is all.

(c) The balance sheet equation is:

Assets + Capital = Liabilities

(d) Non-current assets are things that cannot be moved.

(e) Goodwill has an indefinite life and so should not be amortised.

Required:

Comment critically on each of the above statements, going into as much detail as you can.