Question 1 Accounting Measurement Systems

Part A

On 1 January 2019, George commenced a retail business, which buys and sells fuel. He started the business by investing personal savings of $20, 000. The entire amount was utilized to purchase fuel at a cost of $2.00 per litre. During the year, all the fuel was sold for $2.50 per litre. By the end of the year, the cost of the fuel was $2.10 per litre.

Required Using current cost accounting, calculate the maximum dividend the business can pay out while still maintaining its:

a) Financial capital [3 marks]

b) Physical capital [3 marks]