Q1. Abigail Manchester set up a business selling keep fit equipment, trading under the name of Keep Fit. She put K7,000,000 of her own money into a business bank account (transaction A) and in her first period of trading, the following transactions occurred.
Transaction.
B Paid rent of shop for the period 3,500,000
C Purchased equipment (inventories) on credit. 5,000,000
D. Raised loan from bank.1,000,000
E. Purchase of shop fittings (for cash). 2,000,000
F. Sales of equipment: Cash. 10,000,000
G. Sales of equipment : on credit. 2,500,000
H. Payments for trade accounts payable 5,000,000
I. Payments from trade accounts receivable. 2,500,000
J. Interest on loan ( paid). 100,000
K. Other expenses (all paid in cash). 1,900,000
L. Drawings. 1,500,000
a. Explain what you understand by the term depreciation and it's relevance in the preparation of financial statements.
b. Prepare ledger accounts
c. Prepare an income statement
d. Prepare a balanced sheet