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CMA Intermediate · Financial Accounting · Financial Statements from Incomplete Records

Closing capital of Sunil Rao as per the Statement of Affairs was initially Rs 3,50,000. Later it was found that (i) stock worth Rs 15,000 was omitted from assets and (ii) an outstanding rent liability of Rs 8,000 was omitted. Opening capital was Rs 3,00,000, drawings Rs 40,000 and no fresh capital was introduced. What is the correct profit for the year?

Correct profit is Rs 97,000. Closing capital rises by the omitted stock of Rs 15,000 and falls by the unrecorded rent liability of Rs 8,000 to Rs 3,57,000; the increase of Rs 57,000 plus drawings of Rs 40,000 gives Rs 97,000.

  1. ARs 90,000
  2. BRs 97,000Correct
  3. CRs 83,000
  4. DRs 1,05,000

Explanation

Corrected closing capital = 3,50,000 + 15,000 - 8,000 = 3,57,000. Profit = 3,57,000 - 3,00,000 + 40,000 = Rs 97,000. Rs 90,000 ignores the corrections; Rs 83,000 or 1,05,000 come from reversing signs of the adjustments.

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