CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger
At the start of the year, Meera Enterprises had assets of Rs 12,00,000 and capital of Rs 7,00,000. During the year, assets rose by Rs 3,00,000, liabilities fell by Rs 50,000, and the owner introduced no new capital and made no drawings. What was the profit for the year?
Profit is Rs 3,50,000. Opening liabilities were 5,00,000, so closing assets of 15,00,000 less closing liabilities of 4,50,000 give closing capital of 10,50,000. With no capital introduced or drawings, the rise from 7,00,000 is the profit.
- ARs 3,50,000Correct
- BRs 3,00,000
- CRs 2,50,000
- DRs 4,00,000
Explanation
Opening liabilities = 12,00,000 - 7,00,000 = 5,00,000. Closing assets = 15,00,000; closing liabilities = 4,50,000; closing capital = 10,50,000. Profit = 10,50,000 - 7,00,000 = 3,50,000. Using only the asset increase gives 3,00,000, which ignores the liability fall.
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