Steward pic commences business on 1 January year 1. Let us assume all transactions are by cheque and no credit is given nor taken and that Steward deals only in one type of item of inventory.
1 January Year 1
Introduced capital of €30 000.
Purchased machine for €10 000.
Purchased 1000 items of inventory for €10 each.
31 December Year 1
Sold 800 items of inventory for €15 each.
Paid expenses for the year of €1000.
The NRV of the machine is €9000.
1 January Year 2
Purchased 800 items of inventory for €13 each.
31 December Year 2
Sold 500 items of inventory for €20 each.
Paid expenses for the year of € 1200.
The NRV of the machine is €8000.
Produce profit and loss accounts and balance sheets relating to years 1 and 2 using NRV accounting.