Accounting for Managers: Interpreting accounting information for decision-making

SOLUTIONS TO QUESTIONS 435

14.2
Profit

See Table A2.26.
Note: Depreciation is £2,400 p.a. or £200 per month.

Cash

See Table A2.27.
Note: Depreciation does not involve any cash flow. The opening bank balance is the
capital of £20,000 less the equipment purchased of £7,500.

Balance Sheet

Fixed assets 7,500

Less depreciation 600 6,900

Current assets

Debtors 40,000

Bank 8,500 48,500

Less creditors 8,000

Net current assets 40,500

Total assets less current

Liabilities 47,400

Capital 20,000

Plus profit for period 27,400

47,400

Note:
Debtors 90, 000 − 50 , 000 40,000
Creditors 43, 000 − 35 , 000 −8,000

Table A2.26

July August September Total

Sales 20,000 30,000 40,000 90,000

Purchases 8,000 15,000 20,000 43,000

Gross profit 12,000 15,000 20,000 47,000

Wages 3,000 4,000 5,000 12,000

Other expenses 2,000 2,000 3,000 7,000

Depreciation 200 200 200 600

Operating profit 6,800 8,800 11,800 27,400