Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Get ready modules – FR
- This topic has 3 replies, 2 voices, and was last updated 2 years ago by alawi sayed.
- AuthorPosts
- April 1, 2022 at 3:39 pm #652516
Hello Sir,
In the following question can you please clarify how they got the profit of the year, as what I understand is that the net assets should equal the equity +Retained earnings +reserve .
Thanks,
——————————-
The following information is available for a sole trader who keeps no accounting records:$
Net business assets at 1 July 20X6 186,000
Net business assets at 30 June 20X7 274,000During the year ended 30 June 20X7:
Cash drawings by proprietor 68,000
Additional capital introduced by proprietor 50,000
Business cash used to buy a car for the proprietor’s wife, who takes no part in the business20,000
Using this information, what is the trader’s profit for the year ended 30 June 20X7?
Select one:
$50,000
$86,000
$90,000
$126,000Using the balance sheet equation: Profit = Change in net assets – capital introduced + drawings i.e. (274,000 – 186,000) – 50,000 + (68,000 + 20,000) = $126,000
The correct answer is: $126,000
April 2, 2022 at 9:36 am #652557Hello Sir,
I Can attempt the question like that I will say that the change in net assets contains the addition of capital+the profit for the year -the drawings ,so
88000-50000+88000=$126000 is that the correct approach of the question .
Thanks
April 3, 2022 at 4:24 pm #652640Hi,
Yes, that’s correct but you will rarely see this in FR as it is more common in FFA when we look at incomplete records.
Thanks
April 3, 2022 at 9:44 pm #652669Thanks Sir.
- AuthorPosts
- You must be logged in to reply to this topic.