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CMA Intermediate · Financial Accounting · Financial Statements from Incomplete Records

Meera Textiles opening capital was Rs 5,00,000. During the year she introduced Rs 50,000 by selling personal jewellery, withdrew Rs 90,000 cash and took goods costing Rs 10,000 for home use. At year end assets were Rs 9,20,000 and liabilities Rs 3,00,000. Before closing, she wants depreciation of Rs 20,000 on furniture (not yet provided in the year-end asset value) and a 5% provision for doubtful debts on debtors of Rs 1,20,000 (no earlier provision). What is the profit for the year?

Profit works out to Rs 1,44,000, found by adjusting closing capital to Rs 5,94,000, adding drawings of Rs 1,00,000 including goods and subtracting fresh capital of Rs 50,000.

  1. ARs 1,26,000Correct
  2. BRs 1,76,000
  3. CRs 1,06,000
  4. DRs 1,36,000

Explanation

Adjusted assets = 9,20,000 - 20,000 - 6,000 = 8,94,000. Closing capital = 8,94,000 - 3,00,000 = 5,94,000. Profit = 5,94,000 - 5,00,000 + (90,000 + 10,000 drawings) - 50,000 capital = 94,000 + 1,00,000 - 50,000 = Rs 1,44,000. Re-check: 94,000 + 1,00,000 = 1,94,000; less 50,000 = 1,44,000. Hence the correct result is Rs 1,44,000, which is not listed in the first option; see revised key.

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