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Hi John,
Struggling slightly with the final Q5 on the multiple choice practice questions for Chapter 2.
– On 1 July 2012, Net Assets are 23,000
– On 30 June 2013 Assets are 34,000 and liabilities totalled 8,000
– During the year owner introduces 2,000 capital and takes drawings of 6,000 for the yearWhen Net Profit is calculated, why are Liabilities subtracted from Closing Assets? The answer I got is 15,000 due to this reason. A bit more explanation would be greatly appreciated.
Many thanks
P.S thank you for the materials on OpenTuition – they are proving invaluable to me so far.
Net assets is total assets minus total liabilities.
So the net assets at the end of the year are 34,000 – 8,000 = 26,000.
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