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CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger

Mehta Stores has opening capital of Rs 5,00,000. During the year it earned income of Rs 2,40,000, incurred expenses of Rs 1,70,000, and the proprietor withdrew Rs 30,000 for personal use. If closing liabilities are Rs 1,20,000, what are the closing total assets? (No other capital was introduced.)

Closing assets are Rs 6,60,000. Closing capital is opening capital 5,00,000 plus profit 70,000 less drawings 30,000, giving 5,40,000. Adding liabilities of 1,20,000 gives total assets under the accounting equation.

  1. ARs 6,40,000Correct
  2. BRs 5,90,000
  3. CRs 6,60,000
  4. DRs 7,00,000

Explanation

Closing capital = 5,00,000 + (2,40,000 - 1,70,000) - 30,000 = 5,40,000. Assets = capital + liabilities = 5,40,000 + 1,20,000 = 6,60,000. Wait: recheck gives 5,00,000 + 70,000 = 5,70,000, minus 30,000 = 5,40,000, so assets are 6,60,000, which is option C.

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