Question

Owner's capital in beginning was Rs. 45,000. Creditors at the end were Rs. 30,000. Revenue
during the period was Rs. 65,000. Expenses during the period were Rs. 40,000. Total equity
at the year end will be
(a) Rs. 1,00,000
(b) Rs. 1,20,000
(c) Rs. 80,000
(d) None of these​

Answer 1

Answer:

(d) None of these

Explanation:

To calculate the total equity at the end of the year, we need to use the accounting equation:

Total Assets = Total Liabilities + Owner's Equity

We can rearrange this equation to solve for Owner's Equity:

Owner's Equity = Total Assets - Total Liabilities

We don't have information on the total assets or liabilities, but we can use the information given to calculate the change in owner's equity during the period.

The change in owner's equity during the period is calculated as follows:

Change in Owner's Equity = (Revenue during the period - Expenses during the period) - (Creditors at the end - Owner's Capital in the beginning)

Change in Owner's Equity = (65,000 - 40,000) - (30,000 - 45,000)

Change in Owner's Equity = 25,000 - (-15,000)

Change in Owner's Equity = 40,000

This means that the owner's equity increased by 40,000 during the period. Therefore, the total equity at the end of the year will be the sum of the owner's capital in the beginning and the change in owner's equity during the period:

Total Equity at the end of the year = Owner's Capital in the beginning + Change in Owner's Equity

Total Equity at the end of the year = 45,000 + 40,000

Total Equity at the end of the year = 85,000

Therefore, the total equity at the end of the year will be 85,000.