Chidi, an auto mechanics workshop owner, maintains incomplete accounting records. The details of his assets and liabilities at the beginning and end of the year 2025 are presented in the table below:
| Item | 1 January 2025 (₦) | 31 December 2025 (₦) |
|---|---|---|
| Equipment (Cost) | 500,000 | 500,000 |
| Inventory | 180,000 | 210,000 |
| Trade Debtors | 120,000 | 150,000 |
| Bank Balance | 60,000 | 45,000 |
| Rent Accrued | 10,000 | — |
| Rent Prepaid | — | 15,000 |
| Trade Creditors | 110,000 | 95,000 |
| Electricity Accrued | — | 8,000 |
Additional information for the year ended 31 December 2025:
1. Equipment is to be depreciated at per annum on cost.
2. A provision for doubtful debts of is to be created on trade debtors at year-end.
3. Chidi introduced additional capital of ₦40,000 into the business during the year.
4. He withdrew ₦3,000 cash monthly for personal use and took workshop spare parts valued at ₦14,000 for private use.
What is Chidi's net profit or loss for the year ended 31 December 2025?
- ₦29,500 net profitCevap
- B₦9,500 net profit
- C₦87,000 net profit
- D₦15,500 net profit
Cevap
₦29,500 net profit
The correct answer of ₦29,500 net profit is obtained by properly preparing both opening and closing Statements of Affairs with necessary asset valuation adjustments. Opening capital is ₦740,000 (₦860,000 assets minus ₦120,000 liabilities). Closing capital after 10% depreciation on equipment (₦50,000) and 5% provision on debtors (₦7,500) is ₦759,500 (₦862,500 assets minus ₦103,000 liabilities). Applying the formula Profit = Closing Capital + Total Drawings (₦50,000) - Additional Capital (₦40,000) - Opening Capital (₦740,000) yields ₦29,500.
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Anahtar Kavram
Statement of Affairs Method for Capital and Profit Determination