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CA Intermediate · Advanced Accounting · Framework for Preparation and Presentation of Financial Statements

Kiran Ltd. has the following balances at the year end: Assets ₹12,50,000. Liabilities ₹4,70,000. During the year the owners contributed fresh capital of ₹1,00,000 and withdrew ₹60,000 as distributions. Opening equity was ₹6,00,000. Using the Framework definitions of equity as the residual interest and income/expense effects, what is the profit for the year?

This question has an error in its option set and should not be relied upon.

  1. A₹1,80,000Correct
  2. B₹2,20,000
  3. C₹3,00,000
  4. D₹1,20,000

Explanation

Closing equity = 12,50,000 − 4,70,000 = ₹7,80,000. Change in equity = 7,80,000 − 6,00,000 = ₹1,80,000. Adjust for contributions and distributions: profit = 1,80,000 − 1,00,000 + 60,000 = ₹1,40,000. Hence recompute: the correct profit is ₹1,40,000, but this is not listed, so check the options: the option 1,80,000 ignores owner transactions.

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