A business has the following assets and... | Accounting 0452 | Paper 1 Mock 01 | Multiple Choice

Question 1 Report

A business has the following assets and liabilities.

	Start of year ($)	End of year ($)
Assets	80 000	95 000
Liabilities	25 000	30 000

The owner made no additional capital contributions and took drawings of $3 000 during the year. What was the profit for the year?

$13 000

$10 000

$15 000

$18 000

Answer Details

The correct answer is $13 000.

Working:

Opening capital = Opening assets - Opening liabilities = $80 000 - $25 000 = $55 000.

Closing capital = Closing assets - Closing liabilities = $95 000 - $30 000 = $65 000.

Change in capital = $65 000 - $55 000 = $10 000 increase.

Capital changes due to: Profit - Drawings + Additional capital contributions.

$10 000 = Profit - $3 000 + $0 (no additional capital).

Profit = $10 000 + $3 000 = $13 000.

A business has the following assets and liabilities. Start of year ($) End of year ($) Assets 80 000 95 000 Liabilities 25 000 30 000 The owner made no addi...