Q.A trader keeping incomplete records had the following position on 1st April 2024: Cash ₹6,000; Stock ₹22,000; Debtors ₹16,000; Furniture ₹12,000; Creditors ₹14,000. On 31st March 2025 his position was: Cash ₹9,000; Stock ₹27,000; Debtors ₹19,000; Furniture ₹11,000; Creditors ₹16,000. During the year he introduced additional capital of ₹5,000 and withdrew ₹7,000 for personal use. Calculate the profit or loss for the year ended 31st 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: (6,000+22,000+16,000+12,000) − 14,000 = 42,000. Closing: (9,000+27,000+19,000+11,000) − 16,000 = 50,000. Profit = 50,000 − 42,000 − 5,000 + 7,000 = 10,000.

Statement of Affairs as on 1st April 2024

Statement of Affairs as on 31st March 2025

Capital at the beginning = Total Assets (56,000) − Creditors (14,000) = ₹42,000.

Capital at the end = Total Assets (66,000) − Creditors (16,000) = ₹50,000.

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

= 50,000 − 42,000 − 5,000 + 7,000

= 8,000 − 5,000 + 7,000

= ₹10,000.

As a check: the capital genuinely increased by only ₹8,000 (50,000 − 42,000) over the year, even though the trader actually earned ₹10,000 in profit — the difference is fully explained because the trader also withdrew ₹7,000 (which would otherwise have raised capital further) while bringing in only ₹5,000 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.