ACCA Applied Knowledge · Financial Accounting · Incomplete records
A trader's opening net assets were $48,000. During the year she drew $20,000 for private use and introduced $5,000 of new capital. Closing net assets were $60,000. What was her profit for the year?
Profit is the increase in net assets adjusted for owner transactions: closing 60,000 less opening 48,000 is 12,000, add drawings 20,000, deduct capital introduced 5,000, giving a profit of $27,000.
- A$27,000Correct
- B$7,000
- C$17,000
- D$37,000
Explanation
Closing capital = opening capital + capital introduced + profit - drawings. So 60,000 = 48,000 + 5,000 + P - 20,000, giving P = 60,000 - 33,000 = 27,000. Ignoring the capital introduced would give 32,000 and omitting drawings wrongly gives 7,000.
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