Profit of a partnership firm for the year ended 2018 and 2019 is ₹300000 & ₹350000 respectively. Closing stock as on 31st March,2018 was undervalued by ₹20000. Calculate the exact normal profit of the firm for both year?
Answer & explanation
Correct answer: option 3
Profit of 2018 = 300000 + 20000 (undervaluation of closing stock is added back because it decreases profit)
= ₹320000
Profit of 2019 = 350000- 20000 (closing stock of last year become opening stock of this year, so it also increases profit of this year, so it is reduced)
= 330000