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Using the opening balance sheet for each day and information provided for each day:
- Prepare the balance sheet of Mr. XYZ at the end of each day and
- Prepare the income statement of Mr. XYZ for each day
- Calculate the change in cash balance
- Calculate the difference between change in cash balance and net profit
- Explain the reason for the difference in cash balance and net profit (if any)
Note: (a), (b) and (c) are solved for your convenience.
a) Mr. XYZ used to sell toys in the daily market. On 31 December he had the following asset
balances: Inventory: 500; Bicycle: 300; Cash: 200. He did not have any liabilities and his capital
was 1000.
b) On January 1, he bought inventory worth 300. He sold inventory worth 300 for 500. All
transactions were on cash basis.
c) On January 2, he bought inventory worth 400. He sold inventory worth 300 for 500. All
transactions were on cash basis.
d) On January 3, he sold all his opening inventory for Rs. 1000 on cash basis.
e) On January 4, he bought inventory worth 200. He sold them for 400. While all the purchases were
on cash all the sales were on credit.
f) On January 5, he collected cash from the credit customers whom he had sold inventory on credit
on January 4. There were no other purchase or sales.
g) On 6 January, he purchased inventory worth 200 on credit. He sold them for 350 on cash basis.
h) On 7 January, he purchased inventory worth 500 for cash. He sold them for 800 on cash basis. He
also paid the opening accounts payable.
i) On 8 January, he bought goods worth 400 for cash. He sold them for 600. He realized that the
value of his bicycle has reduced by 20 and therefore depreciated his bicycle by 20.
j) On 9 January, he decided to stop selling toys. He sold his bicycle for 200.
k) Relate your learnings from the exercise to the figure given in illustration 11-4 of the text book:
1
Balance Sheet of XYZ as on and income statement for
Particulars 31-Dec 1-Jan 2-Jan 3-Jan 4-Jan 5-Jan 6-Jan 7-Jan 8-Jan 9-Jan
200+500- 400+500- 2050+800- 2150+600-
Assets 300 400 500+1000 1500-200 1700+350 700 400
Cash 200 400 500 1500 1300 1700 2050 2150 2350 2550
Inventory 500 500 600 0 0
Bicycle (net of depreciation) 300 300 300 300 300 300 300 300 280 0
Accounts receivable 400
Revenues
Sales revenue 500 500 1000 400 350 800 600
2
Name: _________________________________
bicycycle)
: 200
Adj: for
items
belonging
to other
heads
Loss on
sale of
bicycle
+80