Fred Asamah had the following state of affairs as... | WAEC SSCE - Commerce - 2001 (Essay)

Question 1 Report

Fred Asamah had the following state of affairs as at 31st December, 1999

Vehicles	82,000
Furniture	15,000
Stocks	38,000
Debtors	25,000
Creditors	30,000
Cash in hand	10,000
Bank overdraft	5,000
Capital	135,000

(a) Calculate: (i) the current assets of the business (ii)current liabilities (iii) its working capital

(b)What is a current asset? (c) State one significance

Answer

(a) Calculations

(i) Current assets are the short-lived assets: Stocks, Debtors and Cash in hand.

Stocks	38,000
Debtors	25,000
Cash in hand	10,000
Current assets	73,000

\[ \text{Current assets} = 38{,}000 + 25{,}000 + 10{,}000 = 73{,}000 \]

(ii) Current liabilities are the short-term debts: Creditors and Bank overdraft.

Creditors	30,000
Bank overdraft	5,000
Current liabilities	35,000

\[ \text{Current liabilities} = 30{,}000 + 5{,}000 = 35{,}000 \]

(iii) Working capital

\[ \text{Working capital} = \text{Current assets} - \text{Current liabilities} = 73{,}000 - 35{,}000 = 38{,}000 \]

(b) What is a current asset?

A current asset is an asset that is held for a short period (usually less than one year) and is either cash or can readily be converted into cash in the ordinary course of business, for example stock, debtors and cash.

(c) One significance

Current assets provide the ready funds needed to meet short-term obligations and to keep the business running smoothly from day to day.

Read lesson note on Financing Business (JAMB)

Read lesson note on Introduction To Business Management (WAEC)

Read lesson note on Commerce (JAMB)

Read lesson note on Money (JAMB)

Answer Details

(a) Calculations

(i) Current assets are the short-lived assets: Stocks, Debtors and Cash in hand.

Stocks	38,000
Debtors	25,000
Cash in hand	10,000
Current assets	73,000

\[ \text{Current assets} = 38{,}000 + 25{,}000 + 10{,}000 = 73{,}000 \]

(ii) Current liabilities are the short-term debts: Creditors and Bank overdraft.

Creditors	30,000
Bank overdraft	5,000
Current liabilities	35,000

\[ \text{Current liabilities} = 30{,}000 + 5{,}000 = 35{,}000 \]

(iii) Working capital

\[ \text{Working capital} = \text{Current assets} - \text{Current liabilities} = 73{,}000 - 35{,}000 = 38{,}000 \]

(b) What is a current asset?

(c) One significance

Current assets provide the ready funds needed to meet short-term obligations and to keep the business running smoothly from day to day.

Read lesson note on Financing Business (JAMB)

Read lesson note on Introduction To Business Management (WAEC)

Read lesson note on Commerce (JAMB)

Read lesson note on Money (JAMB)

Financing Business

Introduction To Business Management

Commerce

Money

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Fred Asamah had the following state of affairs as at 31st December, 1999 Vehicles 82,000 Furniture 15,000 Stocks 38,000 Debtors 25,000 Creditors 30,000 Cash...

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Fred Asamah had the following state of affairs as at 31st December, 1999 Vehicles 82,000 Furniture 15,000 Stocks 38,000 Debtors 25,000 Creditors 30,000 Cash...

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