CSEET · Fundamentals of Accounting · Accounting Process
At the year-end, Kavita Stores has total assets of ₹9,50,000 and capital of ₹5,00,000 at the start of the year. During the year she drew ₹60,000, and the profit was ₹1,60,000. No fresh capital was introduced. What are the closing liabilities?
Closing liabilities are ₹3,50,000. Closing capital is opening ₹5,00,000 less drawings ₹60,000 plus profit ₹1,60,000, which is ₹6,00,000. Subtracting this from total assets of ₹9,50,000 leaves liabilities of ₹3,50,000.
- A₹3,50,000Correct
- B₹4,50,000
- C₹2,50,000
- D₹5,10,000
Explanation
Closing capital = 5,00,000 − 60,000 + 1,60,000 = 6,00,000. Liabilities = assets − capital = 9,50,000 − 6,00,000 = 3,50,000. Check: 6,00,000 + 3,50,000 = 9,50,000. Adding drawings instead of deducting gives capital 6,20,000 and liabilities 3,30,000, which is wrong.
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