ExpertEasy2 marksShort Answer
ACCA · Question 24 · Sole Trader Accounts
A sole trader started the year with opening capital of $50,000. During the year, they introduced a personal vehicle worth $15,000 into the business, took cash drawings of $8,000, and took inventory costing $2,000 for personal use. The business made a net profit of $25,000. What is the closing capital balance? (Enter the number only)
A sole trader started the year with opening capital of $50,000. During the year, they introduced a personal vehicle worth $15,000 into the business, took cash drawings of $8,000, and took inventory costing $2,000 for personal use. The business made a net profit of $25,000. What is the closing capital balance? (Enter the number only)
How to approach this question
Use the accounting equation for capital: Closing Capital = Opening Capital + Capital Introduced + Net Profit - Drawings.
Full Answer
Closing Capital = Opening Capital ($50,000) + Capital Introduced ($15,000 vehicle) + Net Profit ($25,000) - Cash Drawings ($8,000) - Goods for own use/Drawings ($2,000). Closing Capital = $50,000 + $15,000 + $25,000 - $10,000 = $80,000.
Common mistakes
Forgetting to deduct the inventory taken for personal use as drawings, or treating the introduced vehicle as revenue instead of capital.
Practice the full ACCA FA — Financial Accounting Practice Exam 3
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