ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements
At 31 December, Dalton Co has total assets of $540,000 and total liabilities of $315,000. During the year the owners contributed share capital of $100,000 and no dividends were paid. Opening equity was $90,000. What was the profit for the year?
Profit was $35,000. Closing equity is $225,000 (assets $540,000 less liabilities $315,000). Equity rose by $135,000, of which $100,000 was new share capital, so the remaining $35,000 must be profit retained for the year.
- A$35,000Correct
- B$135,000
- C$225,000
- D$125,000
Explanation
Closing equity = assets less liabilities = 540,000 - 315,000 = 225,000. Equity movement = 225,000 - 90,000 = 135,000. Deduct the capital introduced of 100,000 to leave profit of 35,000. The $135,000 option forgets to remove the share issue.
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