Ivor Innes has supplied you with the following information:
1Apr2010 31Mar2011
£ £
Cash 840 700
Fixtures 7600 7600
Balance at bank 5500 8320
Inventory 17800 19000
Account receivable 8360 4640
Account payable 5200 8800

During the year to 31March2011, Ivor withdrew £11400 from the business for private purposes. In November 2010, Ivor received a legacy of £18000 which he paid into the business bank account.
Ivor agrees that £600 should be provided for depreciation of fixtures and £200 for doubtful debts.

Required :
Prepare a statement of financial position as at 31 March 2011 which clearly indicates the net profit or loss for the year . ( show calculation )

"Prepare a statement of financial position". Yep, better get started, we don't do your homework. We will try to help if you are stumped. Look in your book for a spread sheet and see how it is done.

I do not know what a Legacy is, but it appears to be anowner contribution.

First thing before you get started that you need to know are two formulas, one is the basic accounting equation and the other one is thechanges in equity. Equity is also known as owners' equity.

The basic accounting equation is: Assets = Liabilities + Owners Equity

Which can be rewritten to: Owners equity = Assets – Liabilities

Your assets are Cash, Fixtures, Inventory, and Accounts Receivable. Your liabilities are Accounts Payable. Cash in the Bank means nothing and has no purpose in this problem!!!

The first thing to do is calculate your 1 Apr 2010 Owners Equity, which will be your Beginning Owners Equity.

Now you need to take into consideration your depreciation and doubtful debts amount, because they will affect your 31 Mar 2011 amounts. First take your Fixtures amount on 31 Mar and subtract your depreciation amount to get your net or adjusted 31 Mar fixtures amount and take your 31 Mar accounts receivable amount and subtract your doubtful debts amount to get your net or adjusted 31 Mar accounts receivable amount.

Now you can calculate your Owners Equity amount for 31 Mar2011, which will be your Ending Owners Equity amount

Now for the changes in equity formula, which is: Beginning Owners Equity + Owners Contributions– Owners Withdrawals + Net Income (Revenues - Expenses) = Ending Owners Equity.

Net Income is also known as net profit or loss. Since we have all the information needed for the changes in equity formula except owners' equity you can rewrite the formula to:

Net Income = Ending Owners Equity – Beginning Owners Equity – Owners Contributions + Owners Withdrawals

Now you can calculate your Net Income for the period of 1 Apr 2010 to 31 Mar 2011, which is known as a fiscal year.