CA Foundation · Accounting · Final Accounts of Sole Proprietors
Before adjustments, the net profit of Deshmukh Traders is Rs 94,000. Rent outstanding of Rs 6,000 and interest on bank loan accrued of Rs 4,000 have not been recorded, and commission received in advance of Rs 5,000 was included in income. What is the correct net profit?
The correct net profit is Rs 79,000. Outstanding rent of Rs 6,000 and accrued loan interest of Rs 4,000 are additional expenses, and commission received in advance of Rs 5,000 is not this year's income, so all three are deducted from Rs 94,000.
- ARs 79,000Correct
- BRs 84,000
- CRs 89,000
- DRs 99,000
Explanation
Outstanding rent reduces profit by 6,000 and accrued interest by 4,000. Commission received in advance belongs to the next year, so 5,000 is deducted. Net profit = 94,000 - 6,000 - 4,000 - 5,000 = 79,000. Rs 84,000 ignores the commission adjustment.
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