CA Foundation · Accounting · Theoretical Framework
At the end of a year, a firm's assets were ₹12,00,000 and external liabilities ₹4,50,000. At the start, capital was ₹6,00,000. During the year the owner withdrew ₹60,000 and introduced no fresh capital. What was the profit for the year?
Profit for the year is ₹2,10,000. Closing capital is assets minus liabilities, ₹7,50,000. The capital rose by ₹1,50,000, but because the owner withdrew ₹60,000, profit must have been ₹60,000 higher than that rise.
- A₹1,50,000
- B₹2,10,000Correct
- C₹90,000
- D₹2,70,000
Explanation
Closing capital = 12,00,000 - 4,50,000 = 7,50,000. Closing capital = Opening + Profit - Drawings, so 7,50,000 = 6,00,000 + P - 60,000, giving P = 2,10,000. The figure ₹1,50,000 ignores drawings, which must be added back to the change in capital.
Did you get it right without looking?
One question tells you little. A timed set on Theoretical Framework shows your real accuracy, how long you take and where you lose marks.
More Theoretical Framework questions
- The Conceptual Framework for Financial Reporting prescribes that financial statements should present information that is useful to a wide ra…
- Which of the following is correctly described as a revenue receipt of a trading business?
- Kulkarni Ltd. incurred ₹6,00,000 on a major advertising campaign for launching a new product. The benefit is expected to last about 3 years,…
- Ganesh Stores bought goods costing ₹1,20,000 during the year, of which goods costing ₹30,000 remain unsold at the year-end. The net realisab…
- Ravi started a business with assets of ₹8,00,000 and liabilities of ₹3,00,000. During the year, profit earned was ₹1,20,000, he withdrew ₹40…
- A trader's opening capital was ₹6,00,000. During the year he introduced further capital of ₹1,00,000, withdrew ₹70,000 for personal use, and…