Day: February 11, 2019

The following information relates to a sole trader

• Total of all assets at 1 July – £3,300
• Total of all liabilities at 1 July – £4,500
• Net profit earned during July – £2,000
• Capital introduced during July – £5,000
• Drawings during July – £1,700

Select ONE answer:

1. £4,000
2. £4,100
3. £4,500
4. £4,600

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple choice question is suitable for Accounting KS5 classes.

The answer is 2

• Capital = Assets – Liabilities (as per the Accounting Equation)
• Capital at 1 July = Total Assets at 1 July + Total Liabilities at 1 July i.e. -£1,200 = £3,300 + (-£4,500)
• Capital at 31 July = Capital at 1 July + Capital introduced during July + Net profit earned during June – Drawing during July i.e. -£1,200 +£5,000 + £2,000 – £1,700 = £4,100

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