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CA Foundation · Accounting · Final Accounts of Sole Proprietors

Joshi & Co. had a provisional net profit of Rs 2,40,000. Later it found: (i) Rs 30,000 spent on installing a new machine was debited to Wages; (ii) Rs 12,000 paid for a new office table was debited to Repairs; (iii) Rs 9,000 paid on routine repairs of the machine was debited to Machinery account. Ignore depreciation. What is the corrected net profit?

Corrected net profit is Rs 2,73,000.

  1. ARs 2,79,000Correct
  2. BRs 2,61,000
  3. CRs 2,70,000
  4. DRs 3,00,000

Explanation

Items (i) and (ii) are capital but were charged to expenses, so profit rises by 30,000 + 12,000 = 42,000. Item (iii) is revenue but was capitalised, so profit falls by 9,000. Corrected profit = 2,40,000 + 42,000 - 9,000 = Rs 2,73,000... recomputed: 2,40,000 + 33,000 = Rs 2,73,000.

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