Q.From the following information relating to a trader's business, ascertain the profit or loss for the year ended 31st March 2023 using the Capital Comparison (Statement of Affairs) Method: Opening Statement of Affairs (1.4.2022): Cash ₹10,000; Stock ₹40,000; Debtors ₹30,000; Furniture ₹20,000; Creditors ₹25,000. Closing Statement of Affairs (31.3.2023): Cash ₹15,000; Stock ₹50,000; Debtors ₹35,000; Furniture ₹18,000; Creditors ₹20,000. During the year, the trader introduced ₹12,000 as additional capital and withdrew ₹24,000 for personal use.

Since only assets and liabilities (not a full set of ledger accounts) are given, the fastest route to profit here is the capital comparison formula rather than a full Trading Account.

Opening Capital = (10,000+40,000+30,000+20,000) − 25,000 = ₹75,000. Closing Capital = (15,000+50,000+35,000+18,000) − 20,000 = ₹98,000. Profit = 98,000 + 24,000 − 12,000 − 75,000.

Step 1: Opening Statement of Affairs as on 1.4.2022

Opening Capital = (10,000 + 40,000 + 30,000 + 20,000) − 25,000 = 1,00,000 − 25,000 = ₹75,000

Step 2: Closing Statement of Affairs as on 31.3.2023

Closing Capital = (15,000 + 50,000 + 35,000 + 18,000) − 20,000 = 1,18,000 − 20,000 = ₹98,000

Step 3: Statement of Profit by Capital Comparison

As a cross-check, note the total increase in net assets (98,000 − 75,000 = 23,000) must equal Profit − Drawings + Additional Capital = 35,000 − 24,000 + 12,000 = 23,000, confirming the figure is internally consistent.

The most common error is adding drawings and additional capital the wrong way round — students sometimes deduct drawings and add back additional capital, which is exactly backwards. Remember: drawings REDUCED capital without being a business loss, so they are ADDED BACK; additional capital INCREASED capital without being a business profit, so it is DEDUCTED.