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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

Meera's capital at the start of the year was Rs 5,00,000. During the year she earned a net profit of Rs 1,20,000, withdrew Rs 30,000 for personal use and introduced further capital of Rs 50,000. Her year-end balance sheet has creditors Rs 80,000 and no other liabilities. What is the total of her balance sheet?

The balance sheet total is Rs 7,20,000. Closing capital is 5,00,000 plus profit 1,20,000 plus additional capital 50,000 less drawings 30,000, giving 6,40,000. Adding creditors of Rs 80,000 gives total liabilities, which must equal total assets.

  1. ARs 6,40,000
  2. BRs 7,20,000Correct
  3. CRs 7,80,000
  4. DRs 6,90,000

Explanation

Closing capital = 5,00,000 + 1,20,000 + 50,000 - 30,000 = 6,40,000. Adding creditors of 80,000 gives total liabilities of 7,20,000, which equals total assets. Rs 6,40,000 omits creditors; Rs 7,80,000 wrongly adds drawings; Rs 6,90,000 omits the creditors and ignores drawings.

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