Profit for the year (video below)
The following information is available for a sole trader who keeps no accounting records:
| $ | |
| Net business assets at 1 July 20X6 | 46,500 |
| Net business assets at 30 June 20X7 | 68,500 |
| During the year ended 30 June 20X7: | |
| Cash drawings by proprietor | 17,000 |
| Additional capital introduced by proprietor | 12,500 |
| Business cash used to buy a car for the proprietor’s wife, who takes no part in the business | 5,000 |
Using this information, what is the trader’s profit for the year ended 30 June 20X7?
Answer
Assets = Liabilities + Closing Capital (or Assets = Liabilities + Equity)
Closing Capital = opening capital + profit (loss) + Additional Capital – drawing
Profit (loss) = closing Capital- opening capital-Additional Capital +drawing
| $ | |
| Increase in net assets (68,500- 46,500) | 22,000 |
| Capital introduced | (12,500) |
| Drawings (17,000 +5,000) | 22,000 |
| Profit for the year | 31,500 |
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