Malcolm Phillips is a sole trader who prepares his accounts annually to 30 April. His summarised balance sheets for the last two years are shown below.

Malcolm is surprised to see that he now has an overdraft, in spite of making a profit and bringing in additional capital during the year.

Questions:

(a) Draw up a suitable financial statement which will explain to Malcolm how his overdraft has arisen.

(b) The following further information relates to the year ended 30 April 20X9.

Calculate Malcolm’s

(i) Gross profit margin

(ii) Rate of stock turnover.

Transcribed Image Text:

Fixed assets Less Provision for depreciation Current assets Stocks Trade debtors Bank Current liabilities Trade creditors Bank overdraft Represented by Capital account: Balance at 1 May Add Net profit for the year Additional capital introduced Less Drawings Balance Sheets as at 31 April 20X8 £ £ 2,000 3,100 3,900 1,500 8,500 (2,000) f 15,500 (1,500) 14,000 6,500 20,500 20,000 7,000 27,000 (6,500) 20,500 £ 2,200 900 20X9 £ 5,900 3,400 9,300 (3,100) f 18,500 ( 1,700) 16,800 6,200 23,000 20,500 8,500 2,000 31,000 (8,000) 23,000