Question

The closing balance of owner's equity is $Rs.2,10,000$. During the year, the owner contributed $Rs.60,000$ and withdrew $Rs.40,000$. If the firm had $Rs.80,000$ net income for the year, what was the owner's equity at the beginning?

• A. $RS.2,30,000$
• B. $Rs.2,10,000$
• C. $Rs.1,90,000$
• D. $Rs.1,10,000$

Answer 1

The correct option is D $Rs.1,10,000$

In case there is no double entry system is followed, profit can be calculated by comparing the opening and closing capital. In the given situation this can be calculated as:

Opening Capital Rs. XXXX

Add: Capital Introduced Rs. 60000

Add: Profit for the year Rs. 80000

Less: Loss for the year Rs. NIL

Less: Drawings Rs. 40000

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Capital at the end of the year Rs.210000

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Opening Capital=Closing Capital+Drawings -Profit for the year-Capital introduced

=Rs.210000+Rs.40000-Rs.80000-Rs.60000

Opening Capital = Rs.110000.