Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Kapoor & Sons, a sole proprietorship, has the following position on 31 March 2025: assets ₹9,50,000 and outside liabilities ₹3,50,000. During 2024-25 the proprietor introduced additional capital of ₹50,000 and withdrew ₹80,000 for personal use. Opening capital was ₹5,00,000. Using the accounting equation, what is the profit for the year?

Profit for the year is ₹1,30,000. Closing capital is assets less liabilities, ₹6,00,000. Subtracting opening capital ₹5,00,000 and capital introduced ₹50,000, and adding back drawings ₹80,000, leaves ₹1,30,000. Drawings reduced capital, so they must be added back to find the profit earned.

  1. A₹1,30,000Correct
  2. B₹60,000
  3. C₹1,10,000
  4. D₹2,40,000

Explanation

Closing capital = assets - liabilities = 9,50,000 - 3,50,000 = ₹6,00,000. Profit = closing capital - opening capital - additional capital + drawings = 6,00,000 - 5,00,000 - 50,000 + 80,000 = ₹1,30,000. Ignoring the drawings adjustment gives ₹50,000, and subtracting drawings gives a wrong figure.

Did you get it right without looking?

One question tells you little. A timed set on Four Frameworks of Accounting and Forms of Organization shows your real accuracy, how long you take and where you lose marks.

Practise Four Frameworks of Accounting and Forms of OrganizationFree diagnostic mock

More Four Frameworks of Accounting and Forms of Organization questions