[Lou3000]

Please, please can somebody help me? I'm at the end of my tether!! I am doing a long-distance book-keeping course and finding it very hard as my tutor is hard to contact and is actually off sick at the moment. I am on the last assignment and last question so I can't give up now!

I have to prepare a balance sheet using balances given and thus calculate the capital.
I have broken down the Fixed Assets/Current Assets/Current Liabilities thus:

Fixed Assets total 68,035

Current Assets total 8,757

Current Liabilities total 6,462

Makes a WORKING capital of 2,295

Financed by
Capital ? (how do I work this out?)
Plus Net Profit 14,970

Drawings 11,6000

The second part of my question requires that I prepare a capital account so I need the capital figure before I go any further.

I have been trying to work this out since Saturday morning and am exhausted! I have tried to work from examples in my course book but can't see where they arrive at the capital figures in the examples either!

Can anyone help?!

[codyman144]

Capital is the amount the owners have invested in the business also called owners equity. Drawings are a reduction in capital by the owners basically they are taking their money back. Remember Assets = Liabilities + Owners Equity this equation always has to hold true. Give the problem a try on your own and post the answer here... One of us will help.

Also let us know what you are still not clear on here… you can do this given the information.

[Lou3000]

Thank you! 59,460 as my capital figure.

It was the simple process of taking the Net Profit figure and deducting the drawings which gave me the figure of 3,370, then deducting 3,370 from 62,830 which gave me the Capital figure of 59,460 . Then, of course, 59,460+14,970-11,600 = 62,830!

I was then able to prepare the capital account using those figures.

Now I'm struggling with calculating accumulated fund. I know how to do it - well, the basics, but the question I am answering is written in such a way that my brain is whirling again.

I'm going to try it but I hope you don't mind if I come back and ask for help!

[codyman144]

Not sure if this is right. A = L + E

Total assets would be: 76,792 (68,035+8,757)

So liabilities are 6,462 plus X = 76,792

X = 70,333 (76,792 – 6,462)

Now we know profit can come out 70,333 – 11,600 = 58,730…

Now think of the drawings as a contra-equity account. They reduce total equity the same way accumulated depreciation reduces the asset.

Now I am not perfect so I could have made an error. Does this method make sense to you now? Also I left off the last step… what would be your capital total now?