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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

Gross profit of Mehta Stores is Rs 2,00,000. Expenses recorded are Rs 90,000, which exclude: depreciation Rs 15,000, bad debts Rs 6,000, and a provision for doubtful debts of 5% on debtors of Rs 80,000 (no earlier provision). Interest on proprietor's capital is not to be provided. Net profit is:

Net profit is Rs 85,000. The provision for doubtful debts is Rs 4,000, so the unrecorded charges total Rs 25,000 with depreciation and bad debts. Total expenses become Rs 1,15,000, and deducting this from gross profit of Rs 2,00,000 leaves Rs 85,000.

  1. ARs 85,000Correct
  2. BRs 1,10,000
  3. CRs 1,04,000
  4. DRs 75,000

Explanation

Provision = 5% of 80,000 = 4,000. Additional charges = 15,000+6,000+4,000 = 25,000. Total expenses = 90,000+25,000 = 1,15,000. Net profit = 2,00,000 - 1,15,000 = 85,000. Rs 1,10,000 omits depreciation, bad debts and provision partially.

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