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A sole traders business made a profit of $32500 during the year ended 31 dec 2008.this figure is after deducting $100 per week wages for himself.he puts his home telephone bill through the business books,amounting $400 plus sales tax at 17.5%.he is registerd for sales tax and therefore has charged only the net amount to his SOPL.
his capital at 1 jan 2008 was $6500.what was his capital at 31 dec 2008?
a.$33730 b.$33800 c.$38930 d.$39000my calculation was:
opening capital+profit-drawings
$6500+$32500-$400=$38600
but the answer says option C.$38930 is yhe correct answer..
please explain moffat sir..Anything going to the owner is drawings (whatever the owner might call it).
So the ‘wages’ are really drawings and should not have been charged in the SOPL.
Also the full telephone (including VAT) is drawings, and should not have been charged to the SOPL.So…the true profit is 32500 + (52 x 100) + 400 = 38100
The drawings are (52 x 100) + 470 = 5670Therefore the closing capital = 6500 + 38100 – 5670 = 38930
thanks moffat sir!! nicely explained..its clear now and also learning technical things from you which not mentioned in the kit.
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