Profit or Loss = Capital at end – Capital at beginning + Drawings during the year – Capital introduced during the year. For example, consider the following information extracted from the records of Ms. Sheetu : Capital at the beginning of year, i.e. April , , , Capital at the end of year, i.e.
on March , , , Capital brought in by the proprietor during the year Withdrawals by the proprietor during the year The profit for the year will be calculated as follows : The profit earned or loss incurred during a given period will be computed as follows : Capital as on March , , , Add Drawings during the year , , Less Additional capital introduced during the year ( , ) Adjusted capital at the end, i.e. March , , , Less Capital in the beginning, i.e. April , ( , , ) Profit made during the year , Illustration Mr. Mehta started his readymade garments business on April , with a capital of Rs.
, . He did not maintain his books according to double entry system. During the year he introduced fresh capital of Rs. , .
He withdrew Rs. , for personal use. On March , , his assets and liabilities were as follows : Total creditors Rs. , ; Total debtors Rs.
, , ; Stock Rs. , ; Cash at bank Rs. , . Calculate profit or loss made by Mr.
Mehta during the first year of his business using the statement of affairs method. Solution Books of Mr. Mehta Statement of Affairs as on March , Liabilities Assets , Cash at bank , Capital , , , , , , , , Statement of Profit or Loss for the year ended March , Capital as on March , , Add Drawings during the year , Less Additional capital introduced during the year ( , ) Adjusted capital at end of the year, i.e. March , , Less Actual capital at the beginning of year, i.e.
April , ( , ) Profit made during the year , Illustration Mrs. Vandana runs a small printing firm. She was maintaining only some records,