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CMA Intermediate · Financial Accounting · Financial Statements from Incomplete Records

Ramesh, a trader in Pune, started the year with capital of Rs 4,00,000. At year-end his assets were Rs 7,50,000 and outside liabilities Rs 2,10,000. During the year he withdrew Rs 60,000 and introduced Rs 50,000 as fresh capital. What is the profit for the year?

Profit is Rs 1,50,000. Closing capital is 7,50,000 less 2,10,000, giving 5,40,000, an increase of 1,40,000 over opening capital. Adding drawings of 60,000 and deducting fresh capital of 50,000 gives profit of 1,50,000.

  1. ARs 1,00,000
  2. BRs 1,10,000Correct
  3. CRs 2,10,000
  4. DRs 1,50,000

Explanation

Closing capital = 7,50,000 - 2,10,000 = 5,40,000. Increase = 5,40,000 - 4,00,000 = 1,40,000. Add drawings 60,000 = 2,00,000. Deduct fresh capital 50,000 = 1,50,000. Check: 4,00,000 + 50,000 - 60,000 + 1,50,000 = 5,40,000.

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