Chapter 16 Accounting from Incomplete records

Question 1

What is the net assets equation?

Answer 1

Assets - Liabilities = Capital (net assets)

Question 2

How to calculate profit using net assets?

Answer 2

The profit of a business must be represented by more assets or an increase in capital. We list and value the opening and closing net assets, then calculate the profit as the difference between the two:
Profit = Closing net assets - Opening net assets

Question 3

How to calculate profit after allowances have been made for additional capital and drawings?

Answer 3

Profit = Closing net assets - Opening net assets + Drawings - Capital introduced