Answer :
To prepare the Statement of Changes in Equity for Mansel Traders, we'll go through each step using the information provided.
### Step-by-Step Solution:
1. Initial Balances:
- Capital Accounts:
- Mandy: R800,000
- Selina: R200,000
- Current Accounts as of 01 March 2023:
- Mandy: R60,000 (credit balance)
- Selina: R70,000 (debit balance)
2. Net Profit for the Year:
- The net profit for the year is R600,000. This profit is shared equally between Mandy and Selina, assuming a 50/50 split (unless otherwise specified):
- Mandy's share of profit: R300,000
- Selina's share of profit: R300,000
3. Drawings:
- Mandy's drawings during the year: R320,000
- Selina's drawings during the year: R180,000
4. Calculate Closing Balances for Current Accounts:
- Mandy's Current Account:
- Opening Balance: R60,000
- Add: Share of Profit: R300,000
- Less: Drawings: R320,000
- Closing Balance: R60,000 + R300,000 - R320,000 = R40,000
- Selina's Current Account:
- Opening Balance: -R70,000 (since it is a debit balance)
- Add: Share of Profit: R300,000
- Less: Drawings: R180,000
- Closing Balance: -R70,000 + R300,000 - R180,000 = R50,000
5. Total Equity at Year-End:
- Mandy's Total Equity:
- Capital Account: R800,000
- Current Account Closing Balance: R40,000
- Total Equity for Mandy: R800,000 + R40,000 = R840,000
- Selina's Total Equity:
- Capital Account: R200,000
- Current Account Closing Balance: R50,000
- Total Equity for Selina: R200,000 + R50,000 = R250,000
- Total Equity for the Business:
- Total Equity for Mandy + Total Equity for Selina = R840,000 + R250,000 = R1,090,000
This step-by-step explanation summarizes the preparation of the Statement of Changes in Equity for Mansel Traders for the year ended 29 February 2024.
### Step-by-Step Solution:
1. Initial Balances:
- Capital Accounts:
- Mandy: R800,000
- Selina: R200,000
- Current Accounts as of 01 March 2023:
- Mandy: R60,000 (credit balance)
- Selina: R70,000 (debit balance)
2. Net Profit for the Year:
- The net profit for the year is R600,000. This profit is shared equally between Mandy and Selina, assuming a 50/50 split (unless otherwise specified):
- Mandy's share of profit: R300,000
- Selina's share of profit: R300,000
3. Drawings:
- Mandy's drawings during the year: R320,000
- Selina's drawings during the year: R180,000
4. Calculate Closing Balances for Current Accounts:
- Mandy's Current Account:
- Opening Balance: R60,000
- Add: Share of Profit: R300,000
- Less: Drawings: R320,000
- Closing Balance: R60,000 + R300,000 - R320,000 = R40,000
- Selina's Current Account:
- Opening Balance: -R70,000 (since it is a debit balance)
- Add: Share of Profit: R300,000
- Less: Drawings: R180,000
- Closing Balance: -R70,000 + R300,000 - R180,000 = R50,000
5. Total Equity at Year-End:
- Mandy's Total Equity:
- Capital Account: R800,000
- Current Account Closing Balance: R40,000
- Total Equity for Mandy: R800,000 + R40,000 = R840,000
- Selina's Total Equity:
- Capital Account: R200,000
- Current Account Closing Balance: R50,000
- Total Equity for Selina: R200,000 + R50,000 = R250,000
- Total Equity for the Business:
- Total Equity for Mandy + Total Equity for Selina = R840,000 + R250,000 = R1,090,000
This step-by-step explanation summarizes the preparation of the Statement of Changes in Equity for Mansel Traders for the year ended 29 February 2024.
The Statement of Changes in Equity for Mansel Traders is as follows:
For the year ended 29 February 2024
Details Mandy (R) Selina (R) Total (R)
Capital (01 March 2023) 800,000 200,000 1,000,000
Current Account (01 March 2023) 60,000 (70,000) (10,000)
Net Profit Allocation 400,000 (a) 200,000 (a) 600,000 Less: Drawings (320,000) (180,000) (500,000) Closing Balance 940,000 150,000 1,090,000
1. Net Profit Allocation:
The net profit of R600,000 is split in a 2:1 ratio based on the capital contributions:
- Mandy: (800,000 / 1,000,000) × 600,000 = R400,000
- Selina: (200,000 / 1,000,000) × 600,000 = R200,000
2. Closing Capital Calculation:
- Mandy:
Opening Balance: R800,000 + Current Account: R60,000 + Profit: R400,000 - Drawings: R320,000 = R940,000
- Selina:
Opening Balance:
R200,000 - Current Account: R70,000 + Profit: R200,000 - Drawings: R180,000 = R150,000
Complete Question:
REQUIRED
Prepare the Statement of Changes in Equity for the year ended 29 February 2024.
INFORMATION
The information given below was extracted from the accounting records of Mansel Traders, a partnership business with Mandy and Selina as partners.
The following must be considered:
(a) The net profit for the year ended 29 February 2024 amounted to R600,000.
