Adjustments to Profit

Have you watched the free lecture on adjustments to profit (because there is a very similar problem as part of the example that I go through in the lecture). They have recorder plant repairs (and expense) which were not plant repairs and therefore should not show as an expense. Correcting this will increase the profit. Because they had not recorded assets purchased they will not have charged depreciation which they should have. Correcting this and charging depreciation will reduce the profit.

Ok sir, thanks, I have watched the lectures, it's just I need more practice with this type of question :)

You are welcome :-)

Hey john, I'm confused in this question about what is accounting treatment for this question. I used accounting equation to solve it. Profit= closing assets +drawings-capital introduced - opening Assets A business's bank balance increased by $750,000 during its last financial year. During the same period it issued shares of $1 million and repaid a loan note of $750,000. It purchased non-current assets for $200,000 and charged depreciation of $100,000. Working capital (other than the bank balance) increased by $575,000. What was its profit for the year? A $1,175,000 B $1,275,000 C $1,325,000 D

This is a question on Statement of cash flows (not on the accounting equation). You know the increase in the bank balance, and you know the Cash generated from investing activities and the Cash generated from financing activities. So you can work backwards to calculate the cash generated from operating activities, and from there you can calculate the profit.

Thanks John

You are welcome :-)