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Difficulty: EasyPreparation of Company Statement of Financial Position

The following financial balances were extracted from the ledger of Prime Crest Plc as at 31st December 2025:

- Issued Share Capital: ₦600,000
- Share Premium: ₦120,000
- Retained Earnings: ₦180,000
- 8% Debentures (2032): ₦250,000

What is the total amount of Equity and Reserves to be presented in the Statement of Financial Position?

  1. ₦900,000Answer
  2. B
    ₦1,150,000
  3. C
    ₦780,000
  4. D
    ₦540,000

Answer

The total amount of Equity and Reserves is ₦900,000.
Total Equity and Reserves equals the sum of Issued Share Capital (₦600,000), Share Premium (₦120,000), and Retained Earnings (₦180,000), giving ₦900,000. Debentures are long-term liabilities and are excluded.

Step-by-Step Solution

1
Identify equity components
Issued Share Capital = ₦600,000, Share Premium = ₦120,000, Retained Earnings = ₦180,000.
Equity and Reserves comprises issued share capital, capital reserves (such as share premium), and revenue reserves (such as retained earnings).
2
Distinguish non-current liabilities
8% Debentures = ₦250,000 (Non-Current Liability).
Debentures represent long-term borrowed funds and must be classified under non-current liabilities, not equity.
3
Calculate Total Equity and Reserves
₦600,000 + ₦120,000 + ₦180,000 = ₦900,000
Summing all equity items yields total equity attributable to shareholders.

Key Concept

Classification of Equity and Reserves in Company Financial Statements
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Topics

Preparation of Company Statement of Financial Position

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