Calculate the profit using balance sheet, Accounting Basics

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Part 1

(a) Name and describe the three concepts that form the basis of double entry bookkeeping, and explain how they form the basis of double entry bookkeeping.

(b) How does profit fit into the accounting equation?

(c) What is the purpose of double entry bookkeeping?

Part 2

Alex Bisset started in business on 1 July 2011. His trial balance as at 30 June 2012 was as follows:

Alex Bisset trial balance as at 30 June 2012

                                                                     DR          CR

                                                                     £               £

Opening capital                                                             10,000

Capital contributed during the year                                   6,000

Drawings                                                 3,000

Bank loan                                                                     5,000

Non-current assets                                 20,000

Receivables control                                 7,250

Cash                                                     4,500

Payables control                                                           6,750

Sales                                                                         50,000

Purchases                                          35,000

Other expenses                                   8,000

                                                        77,750                77,750

Calculate profit earned during the period using both the balance sheet approach and the income statement approach to income determination.


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