Accounts from Incomplete Records Single Entry System — Account STD 11 Commerce — Question

For determining the profit, capital in the beginning of the year must also be determined, if necessary, by preparing a Statement of Affairs as in the beginning of the year. If the capital at the end of the year exceeds that in the beginning, it is taken as a profit. If, on the other hand, the capital in the beginning was more than that at the end, a loss. However, following two adjustments must be kept in mind for determin.

1. Adjustments for Capital Introduced: If the proprietor brought in additional capital during the year, it should be deducted from the capital at the end (since this increase is not due to profit but fresh introduction of capital).
2. Adjustment for Drawings: Drawings by the proprietor should be added to the capital at the end-had the drawings not been made, the capital at the end of the year would have been higher.

Formula: Formula for determining the Profit is as follows:
Profit = Capital at the end + Drawings - Additional capital introduced - Capital in the beginning
The above formula may be shown as follows in the form of Statement of Profit or Loss.