Day: October 6, 2024

Alex started his business on 1 December 2022 with cash of £5,000.

He has not yet prepared a full set of financial statements.

As at the end of his first reporting period, 30 November 2023, he has cash at bank of £1,726. He made sales of £33,498 during the period and paid expenses in cash of £19,385. He has no outstanding creditors at the end of the period, and has no fixed assets or stock, but one customer owes him £2,387.

Assuming Alex made no other capital injections but took drawings of £15,000 in the period – then identify his profit for the 12-month reporting period to 30 November 2023 and his net assets at the end of the period on an accruals basis of accounting.

Select ONE answer:

1. Net profit of £11,726, net assets of £1,726
2. Net profit of £14,113, net assets of £4,113
3. Net profit of £11,726, net assets of £4,113
4. Net profit of £14,113, net assets of £1,726

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct – Using the Accounting Equation == > Closing Net Assets (£1,726 + £2,387) £4,113 + Drawings £15,000 – Opening Capital £5,000 = Profit For The Year £14,113
3. Not correct
4. Not correct

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