Page 5 - Chapter-11.pmd

Accounts from Incomplete Records 441

If the net result of above computation is a positive amount, it represents the
profit earned during the year. In case the net result is a negative amount, it
would represent the loss sustained during the year. The same computation can
be done in the form of an equation as follows :
Profit or Loss = Capital at end – Capital at beginning + Drawings during the year
– Capital introduced during the year.
For example, consider the following information extracted from the records of Ms. Sheetu :
Rs.
Capital at the beginning of year, i.e. April 01,2013 1,20,000
Capital at the end of year, i.e. on March 31,2014 2,00,000
Capital brought in by the proprietor during the year 50,000
Withdrawals by the proprietor during the year 30,000
The profit for the year will be calculated as follows :
The profit earned or loss incurred during a given period will be computed as follows :

Particulars Amount
Rs.
Capital as on March 31, 2014 2,00,000
Add Drawings during the year 30,000
2,30,000
Less Additional capital introduced during the year (50,000)
Adjusted capital at the end, i.e. March 31, 2014 1,80,000
Less Capital in the beginning, i.e. April 01, 2013 (1,20,000)
Profit made during the year 60,000

Illustration 1
Mr. Mehta started his readymade garments business on April 1, 2013 with a capital of
Rs. 50,000. He did not maintain his books according to double entry system. During the
year he introduced fresh capital of Rs. 15,000. He withdrew Rs. 10,000 for personal use.
On March 31, 2014, his assets and liabilities were as follows :
Total creditors Rs. 90,000 ; Total debtors Rs. 1,25,600 ; Stock Rs. 24,750 ; Cash at bank
Rs. 24,980.
Calculate profit or loss made by Mr. Mehta during the first year of his business using the
statement of affairs method.
Solution
Books of Mr. Mehta
Statement of Affairs as on March 31, 2014

Liabilities Amount Assets Amount
Rs. Rs.
Creditors 90,000 Cash at bank 24,980
Capital 85,330 Debtors 1,25,600
(balancing figure) Stock 24,750
1,75,330 1,75,330

2015-16