The following balances were extracted from the accounting records of Folake Enterprises, a sole trader, as at 31 December 2025:
| Account Title | Amount (₦) |
|---|---|
| Premises | 450,000 |
| Motor Vehicles | 180,000 |
| Trade Debtors | 65,000 |
| Trade Creditors | 42,000 |
| Bank Overdraft | 15,000 |
| Accrued Rent Payable | 8,000 |
| Prepaid Insurance | 5,000 |
| Closing Inventory | 32,000 |
| 10-Year Bank Loan | 100,000 |
| Owner's Drawings | 12,000 |
What is the working capital of Folake Enterprises as at 31 December 2025?
- ₦37,000Answer
- B₦52,000
- C₦217,000
- D₦25,000
Answer
The working capital of Folake Enterprises as at 31 December 2025 is ₦37,000.
Working capital represents net current assets, derived by subtracting total current liabilities from total current assets. Summing Trade Debtors (₦65,000), Prepaid Insurance (₦5,000), and Closing Inventory (₦32,000) yields ₦102,000 in Current Assets. Summing Trade Creditors (₦42,000), Bank Overdraft (₦15,000), and Accrued Rent Payable (₦8,000) yields ₦65,000 in Current Liabilities. The difference is ₦37,000.
Step-by-Step Solution
Key Concept
Working Capital Calculation and Balance Sheet Element Classification