(a) Explain the following types of capital (i)Authorized capital (ii) Liquid capital (b) the following...
(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