Question

Tia a student of the Small Business Management Group of 2019 established a sole proprietorship, selling car parts for the business. The business is at the end of the first year of operation. As a sole proprietorship she is not required to prepare a formal financial statement however in keeping with good business practices she intends to prepare these statements for personal benefits as a business owner.

The following data were extracted from the books of Tia as at March 31, 2019.  

	$
Building	96,000
Capital	103,598
Cash	12,268
Cost of Goods Sold	42,020
Creditors	6,500
Debtors (Accounts receivable)	13,620
Depreciation Expense	15,092
Drawings	12,556
Electricity Expense	1,032
Furniture and fixtures	17,920
Insurance Expense	6,142
Long Term Loan	80,000
Motor van	37,000
Rent Expense -Warehouse	3,120
Sales	81,200
Stock as at March 31, 2019	19,920
Transportation Expense	9,700

  

You are required to use the information provided above to prepare the basic Financial Statements and the Statement of Cash Flow for Tia’s business as at the 31^st. March 2019.

Answer 1

Profit and loss account
For year ended 31/03/2019
Particulars	Amount ($)
Revenue
Sales	81,200
Less : Cost of Goods Sold	42,020
Gross Margin	39,180
Expenses
Depreciation Expense	15,092
Electricity Expense	1,032
Insurance Expense	6,142
Rent Expense -Warehouse	3,120
Transportation Expense	9,700
Net Profit	4,094

Balance sheet as at 31/03/2019
Particulars	Amount ($)	Amount ($)
Liabilities
Capital	103,598	95,136
Less: Drawings	12,556
Add: Net Profit	4,094
Non-Current Liability		80,000
Long Term Loan	80,000
Current Liability		6,500
Creditors	6,500
Total		181,636
Assets
Non-Current Assets		135,828
Building	96,000
Furniture and fixtures	17,920
Motor van	37,000
Subtotal	150,920
Less : Depreciation	15,092
Current Assets		45,808
Debtors (Accounts receivable)	13,620
Ending Inventory	19,920
Cash	12,268
Total		181,636

Cash Flow Statement
For period ending 31/03/2019
Operating Activities	($)
Cash Received from Customers (working note 1)	67,580
Cash Payments to Suppliers (working note 2)	-55,440
Cash Payment of expenses (working note 3)	-19,994
Cash From Operating Activities	-7,854
Investing Activities
Purchase of Building	-96,000
Purchase of Furniture and fixtures	-17,920
Purchase of Motor van	-37,000
Cash From Investing Activities	-150,920
Financing Activities
Capital Introduced	103,598
Drawings	-12,556
Long Term Loan	80,000
Cash From Financing Activities	171,042
Cash and Cash Equivalents at the beginning of the year	0
Cash and Cash Equivalents at the During of the year	12,268
Cash and Cash Equivalents at the End of the year	12,268

Working Notes

1.

Cash Received from Customers
Sales	81,200
Less: Debtors (Accounts receivable)	13,620
	67,580

2.

Cash Payments to Suppliers
Cost of Goods Sold	42,020
Add: Ending Inventory	19,920
Less : Creditors	6,500
	55,440

3.

Cash Payment of expenses
Electricity Expense	1,032
Insurance Expense	6,142
Rent Expense -Warehouse	3,120
Transportation Expense	9,700
	19,994