Question

The capital in a business on Jan. 1 and Jan 31 is Rs. 17,000 and Rs. 17,200 respectively. Investment by owner and withdrawal by owner during Jan. Amount to Rs. 1000 and Rs. 700 respectively. What is the net income for January?

• A. Rs. 100(Loss)
• B. Rs. 300
• C. Rs. 200
• D. Rs. 500

Answer 1

The correct option is A Rs. 100(Loss)

When accounting is not on full system of accounting i,e. double entry system, profit/loss can be identified by comparing the opening capital and closing capital. This can be represented as:

Opening Capital+Investment by owner+profits of the year-drawings=closing capital.

By putting the given information:

Rs.17000+Rs.1000+Profit-Rs.700=Rs.17200

Rs.18000-Rs.700+Profit=Rs.17200

Rs.17300+Profit=Rs.17200

Profit/Loss=Rs.17200-Rs.17300

Loss of Rs.100