Alex, a sole trader, has been unable to calculate his business’ profit or loss for the year ended 31 December 2023 as a fire destroyed most of his accounting records.
He has, however, been able to provide the following information to his accountant.
(1) Net assets at 31 December 2022 were £23,000 and £32,500 as at 31 December 2023
(2) Alex introduced additional capital during the year of £4,000 in cash
(3) He took cash drawings of £2,500 and goods with a selling price of £800. The cost of the goods was £750 when purchased.
What was Alex’s profit or loss for the year ended 31 December 2023?
Select ONE answer:
- £8,750 profit
- £(1,750) loss
- £9,800 profit
- £(2,750) loss
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 1
- Correct – Opening capital £23,000 + Capital injection £4,000 – Drawings (£2,500 + £750) £3,250 = £23,750 == > Difference to Closing capital of £32,500 is profit = £8,750
- Not correct
- Not correct
- Not correct
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