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CA Foundation · Accounting · Accounts from Incomplete Records

Ramesh, a trader in Pune, had assets of Rs 6,50,000 and liabilities of Rs 1,50,000 at the beginning of the year. At the year end, assets were Rs 8,40,000 and liabilities Rs 1,40,000. During the year he withdrew Rs 90,000 for personal use and introduced fresh capital of Rs 50,000. What is his profit for the year?

The profit is Rs 2,40,000. Opening capital is Rs 5,00,000 and closing capital is Rs 7,00,000, an increase of Rs 2,00,000. Adding back drawings of Rs 90,000 and deducting fresh capital of Rs 50,000 gives the profit of Rs 2,40,000.

  1. ARs 2,40,000Correct
  2. BRs 1,40,000
  3. CRs 1,90,000
  4. DRs 3,40,000

Explanation

Opening capital = 6,50,000 - 1,50,000 = 5,00,000. Closing capital = 8,40,000 - 1,40,000 = 7,00,000. Increase = 2,00,000. Add drawings 90,000 = 2,90,000; deduct capital introduced 50,000 = 2,40,000. Rs 1,40,000 results from deducting drawings and capital wrongly.

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