Erik has a retail business selling china and glass ornaments from a small shop in a town centre. He has the following balances at his year-end of 30 November:

NB: the trade payables include £2200 owed to one company, Ornamental Glass Products Ltd. The company has been waiting for payment for this amount since August and Erik has been rung up on several occasions by the company’s chief accountant requesting immediate payment. Erik has an overdraft limit of £4000.

1 Prepare Erik’s statement of financial position at 30 November.

2 Erik has asked you to advise him on whether he should ask the bank manager for an increase in his overdraft limit. Assess Erik’s position at 30 November as shown by the statement of financial position. 

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3. Freehold premises Shop fittings, computer, till, etc. Cash - float in tillt 16 800 8 300 600 2 000 Loan from mother (no fixed repayment date) Inventory Bank overdraft 10 300 3 800 3 200 Trade payables Payables - due to HMRC for VAT Capital 800 26 200 3. Freehold premises Shop fittings, computer, till, etc. Cash - float in tillt 16 800 8 300 600 2 000 Loan from mother (no fixed repayment date) Inventory Bank overdraft 10 300 3 800 3 200 Trade payables Payables - due to HMRC for VAT Capital 800 26 200

Answer rating: 100% (QA)

Erik Statement of Financial Position as at 30th November Capital 26200 Curr... View the full answer