CA Foundation · Accounting · Theoretical Framework
Anil Traders had capital of ₹4,00,000 at the start of the year and ₹5,20,000 at the end. During the year the proprietor introduced additional capital of ₹50,000 and withdrew ₹30,000 for personal use. What is the profit for the year?
Profit is ₹1,00,000. Increase in capital is ₹1,20,000; adding back drawings of ₹30,000 gives ₹1,50,000, and deducting the fresh capital of ₹50,000 gives ₹1,00,000. Fresh capital is not profit and drawings reduce capital without being expenses.
- A₹1,00,000Correct
- B₹1,20,000
- C₹1,40,000
- D₹70,000
Explanation
Profit = closing capital - opening capital + drawings - additional capital = 5,20,000 - 4,00,000 + 30,000 - 50,000 = ₹1,00,000. Ignoring the adjustments gives ₹1,20,000, and adding the capital introduced instead of deducting it gives ₹1,40,000.
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