ACCA Applied Knowledge · Financial Accounting · Incomplete records
Opening net assets of a sole trader were $40,000. Closing net assets were calculated as $55,000, but it was later found that closing inventory was overstated by $3,000 and an accrued expense of $1,500 was omitted. Drawings were $8,000 and capital introduced was $5,000. What is the correct profit for the year?
Profit is $13,500. Closing net assets fall to $50,500 after deducting the overstated inventory and the omitted accrual. The increase of $10,500 plus drawings of $8,000, less capital introduced of $5,000, gives $13,500.
- A$18,000
- B$13,500Correct
- C$14,500
- D$16,500
Explanation
Corrected closing net assets = 55,000 - 3,000 - 1,500 = 50,500. Increase = 10,500. Profit = 10,500 + 8,000 - 5,000 = 13,500. Check: 40,000 + 5,000 + 13,500 - 8,000 = 50,500. Option 1 wrongly adds the corrections.
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