Mr. Salabhai keeps transaction records of his retail business. He is, however, not aware of the double entry system of accounting, but he would like to work out his profits for the year ending 31st March, 2012. He has given the records as below:
1/4/2011: Opening stock Shs. 180,000; debtors Shs. 50,000; cash in hand Shs. 10,000; cash at bank Shs. 60,000; furniture and fittings Shs. 200,000; Motor vehicle Shs. 320,000; prepaid insurance Shs. 500 and prepaid Electricity bill Shs. 200.
He had liabilities as below; outstanding rent Shs. 30,000; creditors Shs. 20,000; bank loan at 10% interest Shs. 55,000, loan from his mother, Mrs. Joshi at 5% interest p.a. Shs. 45,000
Mr. Salabhai informs you that the year's business was not bad and he had the following balances as on 31/04/2012:
Stock Shs. 210,000; debtors Shs. 70,000; cash in hand Shs. 18,000; Cash at bank Shs. 30,000; furniture and fittings Shs. 200,000; Motor Vehicle Shs. 320,000; prepaid rent Shs. 5,000.
He also had the following liabilities; creditors Shs. 25,000; bank loan Shs. 40,000 (however interest on principal amount has not been paid for the year); Mrs. Joshis loan Shs. 45,000; outstanding electricity bill Shs. 1,250.
Mr. Salabhai had used shs 40,000 from the business to entertain himself and the family and shs 20,000 to buy clothes for his children. The furniture and fittings and motor vehicle depreciate at the rate of 10% per annum. The depreciation should be considered when recording the value of the said assets according to the auditor.
Required:
i) Opening and closing statements of affairs
ii) Statement of profit at the end of the year (22 marks)