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Get ready modules – FR

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 months ago by alawi sayed.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 1, 2022 at 3:39 pm #652516
    alawi sayed
    • Topics: 138
    • Replies: 148
    • ☆☆☆

    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 274,000

    During 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 business

    20,000
    Using this information, what is the trader’s profit for the year ended 30 June 20X7?
    Select one:
    $50,000
    $86,000
    $90,000
    $126,000

    Using 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 #652557
    alawi sayed
    • Topics: 138
    • Replies: 148
    • ☆☆☆

    Hello 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 #652640
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    Hi,

    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 #652669
    alawi sayed
    • Topics: 138
    • Replies: 148
    • ☆☆☆

    Thanks Sir.

  • Author
    Posts
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