The net assets of David, a trader, at 1 January 20X4 amounted to $16,000. During the year to 31 December 20X4 David introduced a further $6,250 of capital and made drawings of $6,000. At 31 December 20X4 David’s net assets totaled $23,000.
What is David’s total profit or loss for the year ended 31 December 20X4?
Answer
Closing Capital = opening capital + profit(loss) + Additional Capital – drawing
Profit(loss)= Closing Capital – opening capital- Additional Capital + drawing
Profit(loss)= 23,000-16,000-6,250+6,000 = $6,750