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1 may purchase of good for resale on credit $300
2 may owner inject long term capital into bussiness $1400
3may payment of rent made $750
4may owner with draws cash from the business $400
7may sale made on credit $1200(goods orignally cost $600)at the start of the week the assets of bussiness were $15700 and liabilities $11200
what is the amount of capital at the end of the week?
a: $5350
b: $1400
c: $850
d: $1000can anyone plz tel me complete solution… i am confused here.. i simply rearrange the formula of accounting equation …but did not get correct answere….
The change in the net assets = profit – drawings + capital introduced.
The net assets at the start of the week were 15,700 – 11,200 = 4,500.
The capital introduced was 1,400. The drawings were 400.
The profit during the week was 1,200 – 600 – 750 = (150) (loss, or negative profit).Now there should be no problem answering the question 🙂
one more question sir…. please tel me why closing inventory are lower when fifo method is used.. assuming that prices have fallen year by year.. please explain it to me
I assume that you are happy with actually calculating FIFO and Average Cost (if not, then do watch the lecture on Inventory / IAS2).
With FIFO the closing inventory is assumed to be the most recent purchases, whereas with AVCO we are taking an average of (usually) earlier purchases as well.
If prices have been falling, then the most recent purchases will have been at a lower cost than earlier purchases.
I hope that makes sense 🙂
(When it is a new topic – as this question is – please start a new thread 🙂 )
sir john thank you once again.. i am going to take cbe of f3 at 17th sep .. and i hope i will pass because opentuition make f3 easy for me 🙂
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