CA Foundation · Accounting · Final Accounts of Sole Proprietors
Arjun, a sole proprietor, has a gross profit of Rs 2,00,000 and indirect expenses of Rs 1,20,000. He has not yet charged depreciation on furniture costing Rs 50,000 at 10% p.a. using the straight-line method. What is the net profit after charging depreciation?
Net profit is Rs 75,000. Gross profit of Rs 2,00,000 less indirect expenses of Rs 1,20,000 gives Rs 80,000. Depreciation at 10% on furniture of Rs 50,000 is Rs 5,000, which is charged to the Profit and Loss Account and reduces profit to Rs 75,000.
- ARs 75,000Correct
- BRs 80,000
- CRs 85,000
- DRs 70,000
Explanation
Profit before depreciation = 2,00,000 - 1,20,000 = 80,000. Depreciation = 10% of 50,000 = 5,000. Net profit = 80,000 - 5,000 = 75,000. Rs 80,000 ignores depreciation.
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