alleryStart learning →In computing profit from incomplete records, drawings made during the year are:
ADeducted from the closing capital figure
BAdded back to the closing capital figure
CIgnored entirely in the whole computation
DAdded to the opening capital of the year
Answer & Solution
Correct answer: B. Added back to the closing capital figure
1. The computation takes the closing capital as its base.
2. Drawings would have reduced the closing capital during the year, so they are added back to undo that effect.
3. Additional capital introduced would have increased the closing capital, so it is subtracted.
4. The result is the adjusted closing capital, which is then compared with the opening capital.
5. The formula printed is closing capital plus drawings minus additional capital minus opening capital equals profit or loss.
_Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 1 "Accounts from Incomplete Records", §1.7.1_
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