ACCA Applied Knowledge · Financial Accounting · Incomplete records
Kiona, a sole trader, does not keep full accounting records. Her opening net assets were $42,000, closing net assets are $55,000, she introduced $6,000 of new capital and withdrew $9,000 for personal use during the year. What was her profit for the year?
Profit is $16,000. The increase in net assets of $13,000 is adjusted by adding back drawings of $9,000 and deducting the $6,000 capital introduced, because those movements did not come from trading profit.
- A$16,000Correct
- B$10,000
- C$22,000
- D$4,000
Explanation
Profit = closing net assets - opening net assets + drawings - capital introduced = 55,000 - 42,000 + 9,000 - 6,000 = $16,000. Check: 42,000 + 6,000 + 16,000 - 9,000 = 55,000. Option $10,000 ignores the capital introduced sign error by adding it; $22,000 adds capital instead of deducting it.
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