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CA Foundation · Accounting · Accounting Process

At the start of a year, a firm's assets were Rs 9,00,000 and liabilities Rs 3,00,000. During the year, the owner introduced additional capital of Rs 1,00,000, withdrew Rs 60,000 for personal use, and the firm earned a net profit of Rs 2,20,000. Closing liabilities were Rs 4,10,000. What were the closing total assets?

Closing capital is opening capital plus additions and profit less drawings, and assets equal capital plus liabilities. This question's data do not reconcile to any option, so it should not be used.

  1. ARs 11,60,000Correct
  2. BRs 11,50,000
  3. CRs 11,70,000
  4. DRs 12,10,000

Explanation

Opening capital = 9,00,000 - 3,00,000 = 6,00,000. Closing capital = 6,00,000 + 1,00,000 - 60,000 + 2,20,000 = 8,60,000. Assets = 8,60,000 + 4,10,000 = 12,70,000? Recompute: 6,00,000+1,00,000=7,00,000; minus 60,000 = 6,40,000; plus 2,20,000 = 8,60,000. Adding 4,10,000 gives 12,70,000, which is not an option, so the data are inconsistent.

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