Accounting for Incomplete Records – Calculate Net Profit
The following data pertains to a trader,
Opening Capital $10,000
Closing Capital $12,000
Drawings during the Year $500
What was the NET PROFIT of the trader for that year?
Solution & Explanation
So we have an Accounting for Incomplete Records Quiz Question.
The equation that we can use here:
Opening Capital – Drawings + Investments During Year + Net Profit = Closing Capital
Here in this accounting quiz there is no investment made during the year, so we can assume its value to be zero. You have all other values other than Net Profit that is required to calculate.
Op. Capital – Drawings + Net Profit = Closing Capital
$10,000 – $500 + Net Profit = $12,000
Net Profit = $12,000-$10,000+$500
Net Profit = $2,500
So, the Net Profit is arrived at as you can find in above calculation giving us the correct answer of the quiz, that is $2,500.
This Accounting for Incomplete Records is a very conceptual topic, you need to study about the equations used here, they are quite important to understand, in fact comes in the very basics of accounting.