CASE: Ribbons an’ Bows, Inc

M Vineel Raj
Christ University School of Business and Management
August 5th 2022
 Trading &Profit and Loss Account
Dr Cr
To Opening stock 3300 By Sales 7400
To Purchases 2900 By Credit Sales 320
To Gross Profit c/d 5620 By Closing Stock 4100
11,820 11820
To Rent 1800 By Gross Profit 5620
To Office Supply 80
To advertisement 150
To Depreciation
Sewing Machine 60
Computer 250
To Interest on 200
Capital
To Salary 1400
To Net Profit 1480
5620 5620

Working Note:
1) Depreciation Calculation

Sewing Machine =1800/5 *2/12 =60

Computer= 2000/2*3/12 =250

Conclusion:
Yes, the company was profitable as statement of profit and loss account shows a net
profit of $1480. The cash in bank declined because of the purchase of Sewing Machine
worth $1800, Carmen also owed money to her employees and due to prepaid rent
amount for two months the cash in bank reduced.

2)Financial Condition Report as on June 30th 2006

 Balance Sheet as on June 30th 2006
Liabilities Amount Assets Amount
Capital 11000 Computer 2000
Net Profit 12480 Less Depreciation 250 1750
Wages 90 Machinery 1800
Interest 10000*6/100*4/12 Less depreciation 60 1740
Outstanding =200
Cash Register 250
Debtors 320
Cash 3390
Closing Stock 4100
Supply 20
Prepaid Rent 1200
12770 12770

2) Despite Carmen having outstanding salaries to be paid to her part time

employees, her outstanding interest and also her inability to not provide herself
with the compensation, she still managed to earn a profit of $1480 during the
period of 4months. Therefore Carmen’s operations could be deemed successful.