Q.A trader's Statement of Affairs as on 1st April 2024 showed: Cash ₹5,500; Stock ₹19,000; Debtors ₹15,000; Furniture ₹10,000; Creditors ₹12,000. As on 31st March 2025, it showed: Cash ₹7,800; Stock ₹23,000; Debtors ₹17,500; Furniture ₹9,500; Creditors ₹13,500. During the year the trader introduced additional capital of ₹4,000 and withdrew ₹5,500 for personal use. It was later found that Prepaid Insurance of ₹600 had been omitted from the closing Statement of Affairs. Ascertain the Net Profit for the year.

Find capital at both dates, compute profit before further adjustments, then add the prepaid insurance omitted from the closing statement, since a genuine asset was understated. …

Capital at the beginning (1st April 2024):

Assets = 5,500 + 19,000 + 15,000 + 10,000 = ₹49,500.

Liabilities = Creditors ₹12,000.

Capital = 49,500 − 12,000 = ₹37,500.

Capital at the end (31st March 2025, as originally prepared):

Assets = 7,800 + 23,000 + 17,500 + 9,500 = ₹57,800.

Liabilities = Creditors ₹13,500.

Capital = 57,800 − 13,500 = ₹44,300.

Statement of Profit for the year ended 31st March 2025

Students sometimes DEDUCT an omitted prepaid expense instead of adding it, confusing it with an omitted outstanding (payable) expense — a prepaid expense is an ASSET the business already owns the benefit of, so omitting it understates capital and profit, and it must be ADD …