You are the newly appointed accountant of Inner-City (a sole proprietor) and you have received this letter from your client:

You are required to:

1. Prepare the statement of profit or loss & other comprehensive Income for Inner-City for the year ended 31 December 20x2.

2. Prepare the statement of financial position as at 31 December 20x2.

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Inner-City PO Box 5000 Florida 1710 01 February 20x3 Dear Accountant I was pleased when you agreed to act as my accountant. I would like to indicate that I accept the proposed fee of R15 000 per annum. I regret to inform you that the paper work done during the year is incomplete. I started my construction business on 1 January last year, and deposited R70 000 into a business bank account on that date. I brought my van, with a value of R30 000, into the firm at that time. I think it will last another three years after the end of the first year of business use. I was lucky enough, from the start of the business, to have Miss Zwane as my administration clerk. She is paid a salary of R15 000 per annum. Analysis of the invoices and delivery notes revealed the following: • The materials bought cost me R50 000, but there was unused material of R1 000 on 31 December. I have not yet paid for all of the material. I think that I still owed R2 000 to the suppliers on 31 December. • I was perplexed to note that I've made an unintentionally excessive investment on non-working capital. I spent R50 000 on construction equipment that, in my opinion, will last me for four years or so. Electricity invoices received up to 30 September came to R10 000, but general expenses and motor expenses were R2 000 and R4 000, respectively, for the whole year. The insurance premium was R15 000 for the year to 31 March. My administration clerk must have lost invoices for rent as these were not found in the invoice box and were, therefore, not paid. The cost of rent is R500 per month.