Use the following information to answer the given question. BALANCE SHEET AS AT 31st DECEMBER, 2010 \(\begin{array}{c|c} & ₦ & & ₦ \\ \hline \text{Capital}&...
Question 1 Report
Use the following information to answer the given question.
BALANCE SHEET AS AT 31st DECEMBER, 2010
\(\begin{array}{c|c} & ₦ & & ₦ \\ \hline \text{Capital}& 40,000 & \text{Freehold premises} & 50,000\\ \text{Less: Net loss} & \frac{5,000}{35,000} & \text{Stock} & 3,000\\ \text{Less: Drawings} & \frac{2,000}{33,000} & \text{Debtors} & 4,000\\ \text{Long term loan} & \frac{20,000}{53,000} & \text{Cash at bank} & 6,500\\ \text{Creditors} & 8,000\\ \text{Accrued expenses} & \frac{4,000}{65,000} & \text{Cash in hand} & 1,500\\ & & & \text{Total 65,000}\end{array}\)
The amount of working capital is
Answer Details
Working capital is the difference between current assets and current liabilities. Current assets are assets that can be converted to cash within one year, while current liabilities are liabilities that are due to be paid within one year.
From the given balance sheet, the current assets are: stock (₦3,000), debtors (₦4,000), cash at bank (₦6,500), and cash in hand (₦1,500), which adds up to ₦15,000.
The current liabilities are: creditors (₦8,000) and accrued expenses (₦4,000), which adds up to ₦12,000.
Therefore, the working capital is current assets minus current liabilities, which is ₦15,000 - ₦12,000 = ₦3,000.
Hence, the answer is ₦3,000.
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