Raj owns a business called Gold Medal Sports Supplies which was opened on 1 January 2013. Raj does not keep proper books of account.

The following information is available about the year ended 31 December 2014:

Summary of bank statements for the year ended 31 December 2014:

Additional information:

• At 31 December 2014 there were unpresented cheques of $1300 for payments made to trade suppliers.

• Raj had taken goods for own use at cost $390 during the year ended 31 December 2014.

• Raj has allowed credit customers cash discounts totalling S540 during the year ended 31 December 2014.

• All cash takings were banked.

a. State two possible reasons why Raj does not maintain a full accounting system.

b. Prepare an income statement for the year ended 31 December 2014.

c. Raj's accountant has calculated the following ratios based on the business's performance in the year ended 31 December 2013.

Calculate the following ratios based on the business's income statement for the year ended 31 December 2014. Give your answers in whole numbers.

i. Trade payable turnover

ii. Trade receivable turnover

iii. Rate of inventory turnover

d. Assess the business's performance with regard to liquidity using the information about three ratios.

Transcribed Image Text:

1 January 31 December 2014 2014 Fixtures and fitings at book value 28 400 30 600 Inventory 4 400 4 600 Trade receivables 2 830 1 700 Trade payables 3 490 3 920 Other payables electricity charges 780 810 shop rent 440 Other receivables: 530 shop rent