Alhaji Musa runs a small trading business and does not maintain double-entry records. His capital at 1 January 2023 was ₦3,750,000. During the year he introduced additional capital of ₦500,000, withdrew ₦720,000 for personal use, and received a gift of a motor van valued at ₦1,200,000 which he introduced into the business. His net assets at 31 December 2023 were ₦6,430,000. What is his net profit for the year ended 31 December 2023?

Using the statement of affairs approach: Closing capital = Opening capital + Additional capital introduced + Asset introduced + Net profit - Drawings. Therefore: ₦6,430,000 = ₦3,750,000 + ₦500,000 + ₦1,200,000 + Net profit - ₦720,000. Net profit = ₦6,430,000 - ₦3,750,000 - ₦500,000 - ₦1,200,000 + ₦720,000 = ₦1,700,000. The motor van introduced as a gift increases capital and must be included as a capital introduction alongside cash introduced.