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CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Principles, Concepts and Conventions

Anita Enterprises had the following on 31 March: Rs 90,000 of assets, and liabilities were Rs 30,000. During the year the owner introduced further capital Rs 20,000 and withdrew Rs 10,000 for personal use. Capital at the start of the year was Rs 40,000. What was the profit for the year?

Profit is Rs 10,000. Closing capital is 90,000 minus 30,000, which is 60,000. Deduct opening capital 40,000 and fresh capital 20,000, then add back drawings 10,000, giving 10,000. Note this means the correct choice is the first option, not Rs 30,000.

  1. ARs 10,000
  2. BRs 20,000
  3. CRs 30,000Correct
  4. DRs 40,000

Explanation

Closing capital = 90,000 - 30,000 = 60,000. Profit = closing capital - opening capital - additional capital + drawings = 60,000 - 40,000 - 20,000 + 10,000 = 10,000. Check: 40,000 + 20,000 + 10,000 - 10,000 = 60,000 holds. The 30,000 option comes from ignoring the capital introduced and drawings in the wrong direction.

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