Exercise 2.3: The following information has been supplied by Alan Withers, the o

Question

Exercise 2.3: The following information has been supplied by Alan Withers, the owner of Appliances, as at 31 August 2005: b State the accounting equatión Ul u Cash on hand $500, Bank overdraft $3 400, Business premises $120 000, Creditor-Wholesale El 56 500, Stook of goods $29 700, Debtor-Seaview Primary School $280, Office furniture and fittinos 3 200, Vehicles-business $18 000 and private $28 000, Stock of spare parts $1 800, Mortgage loan due 2022) $80 000, Personal home loan $34 000, Debtor - Spotswood Social Club $1 200, Loan for busi- ness vehicle $4 000 (repayable over next two years). a Using the relevant information from the items listed above, prepare a classified statement of b Explain your treatment of the following items: financial position for Al's Appliances as at 31 August 2005 i Vehicle-private ii Personal home loan. Refer to the relevant SAC and/or accounting principle in your answer ly the net worth of the business to the owner. c State the accounting equation in the statement of financial position in part a, showing

Explanation / Answer

(a) Statement of Financial Position of AI's Appliances as at 31 August 2005 Particulars USD Assets Cash on Hand                                             500 Debtors - Seaview Primary School                                             280 Debtor - Spotswood Social Club                                         1,200 Stock of Goods                                       29,700 Stock of Spare Parts                                         1,800 Office Furniture & Fittings                                         3,200 Vehicles - Business                                       18,000 Business Premises                                    120,000 Total Assets                                    174,680 Liabilities Bank Overdraft                                         3,400 Creditors - Wholesale Electrical                                         6,500 Loan for Business Vehicle (Repayable over 2 years)                                         4,000 Mortgage Loan (Due 2022)                                       80,000 Total Liabilities                                       93,900 Owner's Capital Networth of the business to the owners                                       80,780 Total Liabilities and Owner's Networth                                    174,680 (b) Vehicle - Private and Personal Home Loan are not related to Business and they are assets and liabilities of Owners in his personal capacity. Accordingly, these will not be disclosed in the Statement of Financial Position of AI's Appliances. These needs to be debited or credited in Owner's personal capital account. (c) The Networth of the Business to the owner is Business Assets less Business Liabilities.

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