Question

Calculate Profit and LOSS:

start a business having Asset of Rs 5,00,ooo and Liabilities of Rs 1,00,000.At the end of accounting period their asset is Rs 7,00,000 and liabilities is Rs.50,000​

Answer 1

ANSWER

In case there is no double entry system is followed, profit can be calculated by comparing the opening and closing capital. In the given situation this can be calculated as:

Opening Capital Rs.200000

Add: Capital Introduced Rs.200000

Add: Profit for the year Rs. 250000

Less: Loss for the year Rs.NIL

Less: Drawings Rs. 30000

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Capital at the end of the year Rs.620000

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Loan taken is a liability and loan given is asset, that will not affect the capital.