Question

On March 1 2020 Joe started a new sole trader business. During March he carried out the following businesses-related transactions:

1. Deposited $20,000 cash in a business bank account

2. Purchased fixtures and fitting for $6000 cash, and inventory valued at $8000 on credit

3. Borrowed $5000 from a relative, repayable in 2 years time, and deposited it in the bank

4. Purchased a van for $7000 cash and withdrew $200 for his own use

5. Won $2000 in a lottery and paid it all into the business bank account

6. Repaid $1000 of the $5000 loan

Prepare the statement of financial position as at 7th of March 2020

EXPLANATION NEEDED PLEASE

Answer 1

Let's calculate the cash statement to find out the Cash & Bank balance.

Cash & Bank Statement of Joe
Particulars	Amount
Deposited Cash	20,000
Purchased Fixture & Fitting	-6000
Borrowed Money from relative - Long Term	5000
Purchased Van	-7000
Cash Withdrawal	-200
Lottery Receipts	2000
Loan Repayment	-1000
Net Cash & Bank Balance	12,800

Now, we'll record all Cash & Bank and assets purchased on assets side.

Long-term borrowings after adjusting repayment of 1,000 will be reflected on liabilities side.

Inventory, since purchased on credit, will also record Accounts Payable on the liabilities side.

Balance Sheet Extract as of 7th March is as follows:

Balance Sheet Extract as of 7th March
Assets	Amount	Liabilities	Amount
Cash & Bank	12,800	Long Term Borrowings, Net	4,000
Fixture & Fitting	6,000	Accounts Payable	8,000
Van	7,000
Inventory	8,000
Total