Question

identify if following statement is correct or not : "capital at the end +Drawings -additional capital -opening capital = closing capital"​

Answer 1

Answer:

This statement is wrong

Right statement is Closing capital + drawing -Additional capital - opening capital = profit

Answer 2

ANSWER :

The statement is :-

• Capital at the End + Drawings - Additional Capital - Opening Capital = Closing Capital.

This statement is wrong.

Correct Statements :-

• Opening Capital + Additional Capital + Profit - Drawings = Closing Capital [When there is a Profit]

• Opening Capital + Additional Capital - Loss - Drawings = Closing Capital [When there is a Loss]

• Capital at the End + Drawings - Additional Capital - Opening Capital = Net Profit.

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EXPLANATION :

• When there is a profit, Closing Capital is calculated by adding Opening Capital, Additional Capital and Profit less Drawings; i.e., Closing Capital = Opening Capital + Additional Capital + Profit - Drawings.

• When there is a loss, Closing Capital is calculated by adding Opening Capital and Additional Capital less Loss and Drawings; i.e., Closing Capital = Opening Capital + Additional Capital - Loss - Drawings.

• Net Profit is calculated by adding Capital at the end and Drawings, less Additional Capital and Opening Capital; i.e., Net Profit = Capital at the End + Drawings - Additional Capital - Opening Capital.