On 1 March 2022. Deep Breath, a fitness fanatic, set up a gym called Fitshape Gym to

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Question:

On 1 March 2022. Deep Breath, a fitness fanatic, set up a gym called Fitshape Gym to follow his passion to promote healthy living. The following were the transactions for month ended 31 March 2022: March

1 MARCH Transferred R80 000 from his personal savings account into Fitshape Gym’s bank account. Also transferred gym equipment valued at R20 000 from his home gym to the business premises.

2 MARCH Paid rent for March by cheque, R4 000;

5 MARCH Purchased additional equipment on credit from Muscle-up Equip for R54 000. This account is payable in three (3) equal monthly instalments that are payable at the end of March, April and May 2022.

7 MARCH. Deep Breath withdrew R1 500 from the bank account for personal use.

9 MARCH Made an electronic funds transfer (EFT) of R3 000 in favour of A Buddy to set up a web page and on-line advertisements.

30 MARCH Total gym fees for the month of R27 000 was deposited into the bank account.

31 Issued a cheque for the first instalment payable to Muscle-up Equip (refer to transaction 5 March 2022 above).

Required:

1.1. Process Fitshape Gym’s transactions through the basic accounting equation for the month ended 31 March 2022.

1.2. With reference to the International Financial Reporting Standards (IFRS) and its Framework, provide the definition of assets. In respect of Fitshape Gym’s equipment at 31 March 2022, briefly explain why you would choose to treat the equipment as either a non-current asset or a current-asset.

1.3. Refer to the transaction on the 5 March 2022 above, and briefly explain whether the amount owing to Muscle-up Equip must be shown as a non-current liability or a current liability in the financial statements at 31 March 2022.

1.4. Briefly describe what is generally accepted to be the purpose of financial accounting.