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Changes in Trade Receivables

Assets in the...

Question

Assets in the beginning of the year Rs. 10,000. Assets at the end of the year Rs. 18,000. Drawing during the year Rs. 2,000. Therefore the profit is equal to ___________.

A

Rs. 6,000

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B

Rs. 8,000

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C

Rs. 10,000

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D

None of the Above

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Solution

The correct option is C Rs. 10,000
In absence of double entry system of accounting, profits can be calculated by comparing the opening and closing assets by giving the effect of drawings.

This can be represented as:
Opening Assets+Profits during the year-Drawings=Closing Assets

By putting the given information in the equation:
Rs.10000+Profit-Rs.2000=Rs.18000
Rs.8000+Profit=Rs.18000
Profit will be Rs.10000

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