Case No.

1
Venu’s Music Corner provides music services at social functions. A small CA firm
maintained its accounting records. On March, 31, 20XX, the records showed a
balance of Rs 21,140 in the capital account. Venugopal, the owner felt that the
accountant’s fees were too high and decided to maintain the firm’s accounting
records himself. He prepared the following statements at the end of April, 20xx. He is
horrified that the business has fared very badly, and wants you to review the
statements.
Income Statement
Revenues Rs Rs
Investments by Owner 3,000
Unearned Revenue 600 3,600
Expenses
Salaries expenses 5,600
Electricity expenses 410
Advertisement expenses 130
Rent expenses 300
Drawings 4,000
Total expenses 10,440
Profit (loss) (6,840)

Balance Sheet
Assets Rs Rs
Cash 570
Debtors 1,210
Supplies 2,190
Equipment 25,500
Total Assets 29,470
Liabilities
Creditors 2,510
Revenue from services 12,660
Total liabilities 15,170
Equity
Venugopal, Capital 14,300
Total equity 14,300
Total liabilities and equity 29,470

Comment on the working of business.