Question

8. Odum Ltd keeps his books on single entry basis. Given assets and liabilities as at 1st January 2014 and 31st December 2014 (Investment, Bills payable, Creditors, Debtors, Cash, Stock, Motor car, Loan from Nyadu), and that Odum withdrew GH₴500 and introduced GH₴200 additional capital during the year, you are required to ascertain: (i) opening capital; (ii) closing capital; (iii) net profit, and (b) prepare the balance Sheet as at 31st December, 2014.

Accepted Answer

(i) Opening capital = Total assets − Total liabilities as at 1 Jan 2014 = (Debtors 2,100 + Cash 150 + Stock 1,000 + Motor car 2,000) − Creditors 1,750 = GH₴3,500.
(ii) Closing capital = Total assets − Total liabilities as at 31 Dec 2014 = (Investment 1,000 + Debtors 3,400 + Cash 200 + Stock 1,250 + Motor car 2,000) − (Bills payable 300 + Creditors 1,900 + Loan from Nyadu 500) = GH₴5,150.
(iii) Net profit = Closing capital + Drawings − (Opening capital + Additional capital) = (5,150 + 500) − (3,500 + 200) = GH₴1,950.
(b) Balance Sheet as at 31 Dec 2014: Fixed assets (Motor car GH₴2,000) + Current assets (Stock 1,250, Debtors 3,400, Cash 200, Investment 1,000) = GH₴7,850, financed by Capital (Opening 3,500 + Additional 200 + Net profit 1,950 − Drawings 500 = 5,150), Loan from Nyadu 500, and Current liabilities (Bills payable 300, Creditors 1,900) = GH₴7,850.

WAEC Accounting 2015 Theory — Question 12

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