Good day can you please help with this question.
Deane has the following information relating to the year ended 30 September 20x4:
Non-current assets at the year end $100,000
Working capital at the year end $20,000
Non-current liabilities at the year end $60,000
Opening capital $40,000
Drawings during the year $30,000
What is the profit or loss for the year?
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Net Profit or Loss Question
5y ago#1Increase in capital = Capital at end of period - capital at start = Profit + Capital introduced - Drawings.
Opening capital = $40,000
Closing capital = Non-current assets 100,000 + working capital (current assets - current liabilities) 20,000 - non-current liabilities 60,000 = 60,000
Increase in capital = 60,000 - 40,000 = 20,000
This has happened even though drawings were 30,000, so profit must have been 50,000:
Check:
20,000 (inc in cap) = 50,000 (profit) - 30,000 (drawings)
Thank you very much!
I got profit of $50 000 also but was not 100% sure of my working for the increase/decrease in net assets part of the business equation.
Thank you once again!
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