ACCA Applied Knowledge · Financial Accounting · Incomplete records
At 1 April a business had assets of $90,000 including cash $5,000, and capital of $64,000. At 31 March, assets were $104,000 and liabilities were $30,000. Drawings were $12,000 and no capital was introduced. What was the profit for the year?
Profit is $22,000. Closing capital is $74,000 (assets $104,000 less liabilities $30,000) against opening capital of $64,000, an increase of $10,000. Adding back $12,000 of drawings gives profit of $22,000.
- A$12,000
- B$22,000Correct
- C$10,000
- D$2,000
Explanation
Opening liabilities = 90,000 - 64,000 = 26,000 (not needed further). Closing capital = 104,000 - 30,000 = 74,000. Increase = 74,000 - 64,000 = 10,000. Profit = 10,000 + 12,000 = 22,000. Option 3 omits the drawings adjustment.
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