(a) Explain the following types of capital (i)Authorized capital (ii) Liquid capital
(b) the following records were extracted from the books of Bandin and Bachur Partnership as at March 31st, 2020
|
Equipment |
I50,000 |
|
Cash at bank |
25.000 |
|
Creditors |
120.000 |
|
Debtors |
150 000 |
|
Stock as at 1/03/20 |
30.000 |
|
Motor van |
300,000 |
|
Fixtures and fittings |
40,000 |
|
Overdraft |
45.000 |
|
Stock as at 31/ 03/ 20 |
25,000 |
Calculate: (i) Fixed assets. (ii) Current liabilities: (iii) Current assets: (iv) Working capital (v) Average stock
Explanation
(a)(I) Authorize capital: This is the capital which is stated in the Memorandum of Association of a company and it is the maximum amount a company is allowed to raise
ii) Liquid capital: This is the capital that is made up of assets that can easily be converted to cash. the following records were extracted from the following
(b) (I) Fixed assets
| D | |
|
Equipment |
150,000 |
|
Motor van |
300,000 |
| Fixtures & Fittings | 40, 000 |
| 490, 000 |
ii) Current Liabilities
| Creditors | 120,000 |
| Overdraft | 45,000 |
| 165,000 |
iii) current assests
|
Stock |
25,000 |
| Debtors | 150,000 |
| Cash at bank | 25,000 |
| 200,000 |
iv) working Capital= Current assets - Current liabilities
Current assets= D25,000 + D150,000 + D25,000= D200,000
Current liabilities= D120,000 + D45,000= D165,000
Therefore working capital = D200,000 - D165,000= D35,000
v) Average Stock = Opening stock + Closing stock
2
= D30,000 + D25,000
2
= D55.000
2
=D27,500