The following are the trading of Zainab Trading Co. Ltd, for the year ended 31st December, 1986. Creditors 20,000 Premises 20,000 Machinery 20,000 cash 2000...

Answer Details

We first sort the items into fixed assets, current assets, current liabilities and trading figures.

(a) Fixed assets

Fixed assets are long-lasting assets used in running the business. Here they are Premises, Machinery and Plant.

Premises \(20{,}000\) + Machinery \(20{,}000\) + Plant \(30{,}000\)

\[\text{Fixed assets} = 20{,}000 + 20{,}000 + 30{,}000 = \text{N}70{,}000\]

(b) Working capital

Working capital = Current assets - Current liabilities.

Current assets = Cash \(20{,}000\) + Debtors \(30{,}000\) + Stock \(50{,}000 = 100{,}000\).

Current liabilities = Creditors \(= 20{,}000\).

\[\text{Working capital} = 100{,}000 - 20{,}000 = \text{N}80{,}000\]

(c) Gross profit

Gross profit = Sales - Cost of goods sold.

\[\text{Gross profit} = 200{,}000 - 100{,}000 = \text{N}100{,}000\]

(d) Net profit

Net profit = Gross profit - Expenses. The only expense given is Rent \(= 10{,}000\).

\[\text{Net profit} = 100{,}000 - 10{,}000 = \text{N}90{,}000\]

Summary: Fixed assets = N70,000; Working capital = N80,000; Gross profit = N100,000; Net profit = N90,000.