Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 12 - No. 13)
What are the basic steps to calculate the profit or loss of a business using the statement of affairs?
Determine the changes in assets.
Calculate the difference between the opening and closing equity.
Consider the effect of owner drawings and capital introduced.
Determine the changes in liabilities.
Explanation
Profit/loss is determined from the changes in equity, and equity can be affected by the drawings or introduction of new capital.
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