Skip to content

CA Foundation · Accounting · Accounts from Incomplete Records

Which statement about the Statement of Affairs method of ascertaining profit is correct?

The Statement of Affairs method finds profit as the change in net worth, then adds back drawings and deducts capital introduced. It is used when full books are not kept and does not show individual incomes and expenses.

  1. AIt gives profit as the change in net worth adjusted for drawings and capital introducedCorrect
  2. BIt requires a complete double-entry ledger to be maintained
  3. CIt shows profit by listing each item of income and expense
  4. DIt treats drawings as an expense of the year

Explanation

The net worth method compares opening and closing capital and adjusts for drawings (added back) and fresh capital (deducted). It does not need full double entry, does not list incomes and expenses, and drawings are not expenses.

Did you get it right without looking?

One question tells you little. A timed set on Accounts from Incomplete Records shows your real accuracy, how long you take and where you lose marks.

Practise Accounts from Incomplete RecordsFree diagnostic mock

More Accounts from Incomplete Records questions