A sole trader earns commission of Rs. 15,000 during the year, but Rs. 3,000 remains receivable at year-end. What amount of commission income is reported for the year?
Correct answer: C. Rs. 15,000
- A. Rs. 3,000
- B. Rs. 12,000
- C. Rs. 15,000
- D. Rs. 18,000
Explanation
Under accrual accounting, income earned during the period is reported whether or not it has been received in cash. The full Rs. 15,000 is income, and Rs. 3,000 is also shown as an accrued income asset.
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About Financial Statements of Sole Traders
Sole trader statements calculate revenue, cost of sales, gross profit, operating expenses and net profit, then present assets, liabilities and owner’s capital in the statement of financial position. Adjustments for closing inventory, accruals, prepayments, depreciation, bad debts, drawings and additional capital connect the two statements.
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