Prepare the Statement of Changes in Equity for Maponya Traders (a registered VAT vendor using the perpetual inventory system) for the year ended 31 July 2024 using: opening capital R318 750, additional owner contribution R20 000 (not recorded), revenue R382 000, cost of sales R320 000, expenses R205 750, and drawings R45 000.

Maponya Traders a registered VAT vendor and applies the principles of the perpetual inventory system.\n\nThe following information was extracted from the financial records of Maponya Traders on 31 Jul...

Maponya Traders a registered VAT vendor and applies the principles of the perpetual inventory system.\n\nThe following information was extracted from the financial records of Maponya Traders on 31 July 2024.\n\nMAPONYA TRADERS\n\nEXTRACT FROM THE TRIAL BALANCE AS AT 31 JULY 2024\n\nDebit\n\nCredit\n\nR\n\nR\n\nCapital: M Maponya (1 August 2023)\n\n318 750\n\nDrawings\n\n45 000\n\nLoan receivable\n\n353 262\n\nInventory: Trading\n\n37 250\n\nAdditional information:\n\nThe following information must still be taken into account for the year ended 31 July 2024:\n\na) During the current financial year, the owner contributed an amount of R20 000. The accountant mistakenly didn’t account for it.\n\nb) Revenue for the year amounted to R382 000\n\nc) Cost of sales for the year amounted to R320 000\n\nd) Distribution, administrative and other expenses for the year amounted to R205 750

Prepare the Statement of Changes in Equity for Maponya Traders (a registered VAT vendor using the pe...

Answer

Maponya Traders made a net loss of R143 750 for the year (R382 000 − R320 000 − R205 750). Equity changed from opening capital of R318 750 by adding the unrecorded owner contribution of R20 000, subtracting the net loss of R143 750 and drawings of R45 000. The closing capital balance at 31 July 2024 is R150 000.

Explanation

What the statement must show

A Statement of Changes in Equity for a sole proprietor starts with opening capital, then adjusts for any additional capital introduced, adds or subtracts profit or loss for the year, and finally subtracts drawings to get closing capital.

Calculate profit or loss for the year

Use the given revenue, cost of sales, and total expenses:

$$\text{Net profit (loss)} = \text{Revenue} - \text{Cost of sales} - \text{Expenses}$$

$$= 382\,000 - 320\,000 - 205\,750 = -143\,750$$

So, Maponya Traders made a net loss of $R143\,750$.

Build the Statement of Changes in Equity (Maponya Traders)

Maponya Traders Statement of Changes in Equity for the year ended 31 July 2024

	R
Capital, 1 August 2023	318 750
Add: Additional capital contribution (not recorded)	20 000
Less: Net loss for the year	(143 750)
Less: Drawings	(45 000)
Capital, 31 July 2024	150 000

Quick check (reasonableness)

Opening equity $318\,750$ decreased mainly because the loss $143\,750$ plus drawings $45\,000$ exceed the extra capital $20\,000$, so a lower closing capital of $150\,000$ makes sense.

Skills You Achive

financial accounting preparing financial statements equity reconciliation profit or loss calculation

What the statement must show

Calculate profit or loss for the year

Build the Statement of Changes in Equity (Maponya Traders)

Quick check (reasonableness)

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