Question

A company had beginning assets and liabilities were Rs. 100,000 and Rs. 50,000 respectively.

During the year, the company distributed Rs. 20,000 dividend. At the end of the year, the
company
has doubled its assets and liabilities. Find the net income earned by the company.​

Answer 1

Answer: Rs. 120,000

Step-by-step explanation:

At the end of the year, both assets and liabilities had doubled. New asset and liability figures are therefore:

Assets = Rs. 200,000

Liabilities = Rs. 100,000

Net income is part of equity and as there is no equity, net income must be the entire equity.

Assets = Equity + Liabilities

200,000 = Equity + 100,000

Equity = 200,000 - 100,000

= Rs. 100,000

From this Net income, dividends were distributed to the tune of Rs. 20,000. This should be added back to see the full figure.

= 100,000 + 20,000

= Rs. 120,000