Kim Fuller needs accounting information like incomes, expenses, assets and liabilities for his new business. This includes a truck, trailers, machines, supplies and a warehouse. He also needs non-accounting info like contracts signed and hiring employees.
To value assets, Fuller adds up individual assets totaling $277,000. Opening owner's equity is $165,000 which is Fuller's and siblings' capital.
To determine profit and loss, Fuller needs expense and income data. Expenses include trade and office costs while incomes include operating and non-operating revenues. He should do analysis quarterly as the business is young.
Fuller must carefully record changes to asset values, liabilities if loans are paid
2. 1. What information will Fuller need to manage the business? Classify this information
in two categories: accounting information and non-accounting information.
• Kim Fuller will require data about all the incomes, expenditures, liabilities and
assets of the business, apart from all the non-accounting information.
• The accounting information includes the purchase of a used truck, three trailers,
two grinding machines, supplies and parts, personal computer, accounting
system software and a warehouse. It also includes his capital, the capital
provided by his siblings and the mortgage given by the bank. He would also have
to provide information about the tax returns.
• The non-accounting information includes the signing of contracts with two
bottling companies, seeking the advice of Marion Zimmer and hiring a truck
driver and two grinding machine workers.
3. 2. See what you can do to draw up a beginning-of-business list of the assets and liabilities of
Fuller's company making any assumptions you consider useful. How should Fuller go about
putting a value on the company's assets? Using your values, what is the company's opening
owners' equity?
Balance Sheet
Liabilities Amount Assets Amount
Fuller's Capital 75000 Cash 49800
Fuller's sibling's Capital 90000 Building 162000
Bank Loan 112000 Vehicles 42000
Machinery 20000
Supplies and parts 1000
Computer 2000
Accounting Computer
Software 200
277000 277000
4. • To calculate the total value of the assets, Fuller has to take
the sum of all the individual assets available to his business,
which amounts to $277,000.
• The company’s opening owner’s equity = Fuller’s capital +
Fuller’s siblings’ capital = $165,000.
5. 3. Now that Fuller has started to make sales, what information is
needed to determine "profit and loss"? What should be the general
construction of a profit and loss analysis for Fuller's business? How
frequently should Fuller do such an analysis?
• To determine profit and loss, Fuller needs to consider all the
expenses incurred and incomes earned by the business.
• The expenses would include all trade expenses and office
expenses, which are debited. The incomes would include all
operating and non-operating incomes, which are credited.
6. Dr. Cr.
Trading and Profit and Loss Account for the period ending
Particulars Amount Particulars Amount
To Opening stock By sales
To Purchases By closing stock
To gross profit c/d
To selling and distribution
expenses By Gross Profit b/d
To administrative expenses By interests received
To depreciation and
maintenance By discounts received
To financial expenses By commission received
To abnormal losses
To net profit transferred to capital
• Kim Fuller should ideally do such an analysis on a quarterly basis as the business is
young and small.
7. 4. What other kinds of changes in assets, liabilities, and owners'
claims will need careful recording and reporting if Fuller is to keep
in control of the business?
• Fuller must carefully record and report the changes in the value
of his current and future assets.
• He should record the change in liabilities to assets if and when he
pays back the bank loan and the capital provided by his siblings.
• As Fuller is working at the company, he needs to record any
salary that he claims for himself.
• He must also consider his siblings’ claims against their investments.