Q.A trader keeping incomplete records had the following position on 1 April 2024: Cash ₹5,000; Stock ₹20,000; Debtors ₹15,000; Furniture ₹10,000; Creditors ₹12,000. On 31 March 2025 his position was: Cash ₹8,000; Stock ₹25,000; Debtors ₹18,000; Furniture ₹9,000; Creditors ₹14,000. During the year he introduced additional capital of ₹4,000 and withdrew ₹6,000 for personal use. Calculate the profit or loss for the year ended 31 March 2025.

Prepare a Statement of Affairs at both dates to find capital at the start and end, then adjust for additional capital and drawings.

Opening: (5,000+20,000+15,000+10,000) − 12,000 = 38,000. Closing: (8,000+25,000+18,000+9,000) − 14,000 = 46,000. Profit = 46,000 − 38,000 − 4,000 + 6,000 = 10,000.

Statement of Affairs as on 1 April 2024

Statement of Affairs as on 31 March 2025

Capital at the beginning = Total Assets (50,000) − Creditors (12,000) = ₹38,000.

Capital at the end = Total Assets (60,000) − Creditors (14,000) = ₹46,000.

Profit for the year = Capital at the end − Capital at the beginning − Additional Capital introduced + Drawings

= 46,000 − 38,000 − 4,000 + 6,000

= 8,000 − 4,000 + 6,000

= ₹10,000.

As a check: the capital genuinely increased by only ₹8,000 (46,000 − 38,000) over the year, even though the trader actually earned ₹10,000 in profit — the difference is fully explained because the trader also withdrew ₹6,000 (which would otherwise have raised capital further) while bringing in only ₹4,000 of fresh capital (which is not trading profit at all).

A frequent error is treating the plain increase in capital (₹8,000 here) as the final profit figure, forgetting that additional capital introduced must be deducted and drawings added back before arriving at the genuine trading profit.