Accounting Equation:

ASSETS – LIABILITIES = CAPITAL

QUESTION:

Anushka began a sole trade business on 1 January 20X1. During the first month of trading, the following transactions took place:

She started the business with £5,000 of cash
She took out a loan from the bank of £10,000
She purchased a van for £12,000 cash
She purchased 100 units of inventory on credit at a total cost of £2,500
She sold 10 units of inventory to a customer on credit for a total of £400
She repaid £250 of the loan from the business bank account
She took £10 from the business bank account to cover a personal expense

Calculate the ASSETS, LIABILITIES and CAPITAL of Anushka’s business.

ANSWER:

Assets = £17,240 (£5,000 + £10,000 + £12,000 – £12,000 + £2,500 – £400 + £400 – £250 – £10)

Liabilities = £12,250 (£10,000 + £2,500 – £250)

Capital =£4,990 (£5,000 – £10)