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Net Profit or Loss Question

Forums › FIA Forums › FA2 Maintaining Financial Records Forums › Net Profit or Loss Question

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by CandiceAlibocas.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • March 8, 2021 at 5:51 am #613892
    CandiceAlibocas
    Member
    • Topics: 4
    • Replies: 4
    • ☆

    Good day can you please help with this question.

    Deane has the following information relating to the year ended 30 September 20×4:

    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?

    March 9, 2021 at 6:30 pm #614068
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10198
    • ☆☆☆☆☆

    Increase 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)

    March 10, 2021 at 5:45 am #614075
    CandiceAlibocas
    Member
    • Topics: 4
    • Replies: 4
    • ☆

    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!

  • Author
    Posts
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