Illustration 2
Mohan, a retail merchant commenced business with a capital of Rs. 12,000 on
1.1.94. Subsequently on 1.5.94 he invested further capital of Rs. 5,000. During the
year,
he has withdrawn Rs. 2,000 for his personal use. On 31.12.94, his assets and
liabilities were as follows:-
Rs.
Cash at Bank
3,000
Debtors
4.000
Stock
16,000
Furniture
2,000
Creditors
5,000
Calculate the profit (or) loss made during the year 1994.
(Madras, B.Com, Sep. 1996 & Mar. 1994)
Answers
this is the answer if the balance sheet is tally door if net profit 10000 then when the balance sheet will will tally if the net profit is 10000
Answer:
Profit made during the year 1994 is 5,000.
Explanation:
Calculation of capital as on 31.12.94
We know By accounting Equation;
Total Assets = Total Liabilities + Capital
On 31.12.94, Total Assets of the firm were as follows:
Cash at Bank 3,000
Debtors 4.000
Stock 16,000
Furniture 2,000
Total assets 25,000
On 31.12.94, Total Liabilities of the firm were as follows:
Creditors 5,000
Total Liabilities 5,000
Now, Total Assets = Total Liabilities + Capital
= 25,000 = 5,000 + Capital
= Capital = 20,000
So, capital as on 31.12.94 = 20,000 (Closing Capital)
Profit (or) loss made during the year 1994.
Amount
Closing Capital 20,000
Add : Drawings 2,000
Less: Additional Capital 5,000
Less: Opening Capital 12,000
Profit made during the year 5,000
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