If there are no drawings and no contributions of capital,a profit could be earned in any accounting period if and only if:

Question

Quizplus · Accepted Answer

Without any contributions of capital, the only way to earn a profit is by increasing net assets. This means that revenues earned during the period should exceed expenses. Therefore, the correct option is D, which states that net assets increase during the period. Option A is incomplete as it only mentions the relationship between assets and liabilities but does not provide a clear indication of profitability. Options B and C do not indicate whether the increase in assets/liabilities is due to profit or some other factor.

If There Are No Drawings and No Contributions of Capital,a