Question

The Capital of Sh. Madhusudan on 1st April, 2016 was ₹ 5,00,000 and on 31st March, 2017 was ₹ 4,80,000. He has informed you that he withdrew from the business ₹ 8,000 per month for his private use. He paid ₹ 20,000 for his income-tax and the installment of the loan of his personal house at the rate of ₹ 15,000 per month from the business. He had also sold his shares of Reliance Company costing ₹ 1,00,000 at a profit of 20% and invested half of this amount in the business. Calculate the profit or loss of the business.

Answer 1

Statement of Profit or Loss for the year ended March 31, 2017
Particulars		Amount (Rs)
Capital at the end of the year		4,80,000
	Add: Drawings made during the year (WN1)	2,96,000
	Less: Additional capital introduced during the year (WN2)	60,000
Adjusted capital at the end of the year		7,16,000
	Less: Capital in the beginning of the year	5,00,000
Profit made during the year		2,16,000

Working Note:
WN 1: Calculation of Drawings

$\begin{array}{l}\text{Cash Withdrawn = 96,000}(\text{8,000}\times \text{12})\\ \text{Payment of Income tax = 20,}000\\ \text{Instalment of Personal Loan =}\underset{}{\underline{\text{1,80,000}}}(\text{15,000}\times \text{12})\\ \text{Rs 2,96,000}\end{array}$

WN 2: Calculation of additional capital

$\begin{array}{l}\text{Value of Shares = 1,}0\text{0,000}\\ Add\text{: Profit =}\underset{}{\underline{\text{20,}000}}\\ \text{Sale Value = Rs 1,20,000}\\ \text{Aditional Capital = Rs 60,000}\left(\frac{1,20,000}{2}\right)\end{array}$