Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Principles, Concepts and Conventions

At the start of the year, Meena Traders had assets of Rs 9,00,000 and liabilities of Rs 3,00,000. During the year she introduced additional capital of Rs 1,00,000 and withdrew Rs 60,000 for personal use. At the end of the year, assets were Rs 12,40,000 and liabilities Rs 4,00,000. What is the profit for the year?

Profit equals closing capital minus opening capital, less fresh capital introduced, plus drawings. Opening capital is Rs 6,00,000 and closing capital is Rs 8,40,000. So profit is 8,40,000 minus 6,00,000 minus 1,00,000 plus 60,000, which is Rs 2,00,000.

  1. ARs 1,40,000Correct
  2. BRs 2,00,000
  3. CRs 2,40,000
  4. DRs 1,00,000

Explanation

Opening capital = 9,00,000 - 3,00,000 = 6,00,000. Closing capital = 12,40,000 - 4,00,000 = 8,40,000. Increase of 2,40,000 = profit + 1,00,000 - 60,000, so profit = 2,40,000 - 1,00,000 + 60,000 = 2,00,000. Hmm, recheck: profit = closing - opening - additional capital + drawings = 8,40,000 - 6,00,000 - 1,00,000 + 60,000 = 2,00,000.

Did you get it right without looking?

One question tells you little. A timed set on Accounting Principles, Concepts and Conventions shows your real accuracy, how long you take and where you lose marks.

Practise Accounting Principles, Concepts and ConventionsFree diagnostic mock

More Accounting Principles, Concepts and Conventions questions