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Hi – I feel super stupid. But I need a little bit more explanation.
I was doing the question 1 in Chapter 2, and it asked how do you calculate the traders net profit. The answer was Closing Net Assets + Drawings – Capital Introduced – Opening Net Assets.
Can someone help me understand this a bit more? I am happy with the equation for increase in net assets…Where we are minus’ drawings, but the in the above example we are adding back. I am sure its just manipulation of the equation… so I dont know why I am struggling.
Any help would be appreciated.
Cheers
DYes, you are right bro.
The formula to calculate closing net assets is:
Opening net asset + net profit + capital introduced – drawing = Closing net assetBut when we have to find the net profit or any other item from the above equation we simply rearrange it.
I hope you got the idea!
Linkin: Please don’t answer questions in this forum – it is Ask the Tutor and you are not the tutor.
Dan: The accounting equation is:
Increase in net assets = cap introduced + profit – drawings
So…Closing net assets – opening net assets = cap int + profit – drawings
If you add drawings to both sides:
Closing net assets – opening net assets + drawings = cap int + profit
If you subtract cap int from both sides:
Closing net assets – opening net assets + drawings – capital introduced = profit
Thanks, I have got it. It was a late night last night, nothing was going in. Cheers
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