Question

The following information was obtained from the books of PQR Ltd.: Profit and Loss balance (Dr.) as at 31st March, 2024: Rs 30,000; Profit and Loss balance (Cr.) as at 31st March, 2025: Rs 56,000; Interim Dividend paid during the year: Rs 36,000. The net profit before taxation for the year ended 31st March, 2025 will be:

• A. Rs 86,000
• B. Rs 62,000
• C. Rs 1,22,000
• D. Rs 50,000

Hint:

Profit = closing balance - opening balance + interim dividend. Add the opening debit, not subtract it.

Answer 1

The Correct Option is C

Step 1: Understand the question:
We know the Profit and Loss balance at the start (a debit balance) and at the end (a credit balance) and the interim dividend paid. We must find the net profit before tax.

Step 2: Recall the logic:
The Profit and Loss balance moves up by the profit kept in the business. Profit before tax = closing balance - opening balance + interim dividend paid.
A debit balance is a negative figure, so it is added back when it is taken from the closing balance.

Step 3: Do the calculation:
Opening balance (Dr.) = - Rs. 30,000. Closing balance (Cr.) = + Rs. 56,000.
Change in balance = 56,000 - (- 30,000) = Rs. 86,000.
Add the interim dividend paid, because it was taken out of profit: 86,000 + 36,000 = Rs. 1,22,000.

Step 4: Why the other options are wrong:
Option (A) Rs. 86,000 shows only the rise in the balance. It forgets that Rs. 36,000 of profit was paid out as dividend.
Option (B) Rs. 62,000 subtracts the opening debit balance (56,000 + 36,000 - 30,000). A debit balance has to be added.
Option (D) Rs. 50,000 subtracts the dividend (86,000 - 36,000). Dividend paid must be added back.

Final Answer:
Net profit before taxation = Rs. 1,22,000. Option (C).