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Hello, My question is regarding FA Chapter practice questions 1 and 5.
in the lecture the accounting equation is “increased in net assets = profit+capital introduced – drawings”. This is the equation I used to calculate the profit and drawing for the year for example 1 and 2 in the lecture note. Please can you explain why this equation does not apply for question 1 and 5 of the practice questions? thank you.The equation certainly does apply!!!
The answer to question 5 appears when you submit your answer and review the test, but here it is again:
We know the increase in net assets is 3,000. We know that the capital introduced is 2,000 and that the drawings are 12 x 500 = 6,000.
Therefore the profit = 3,000 – 2,000 + 6,000 = 7,000 (which is what is given as the correct answer).
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