Question

PRODOVINI CU UU)
11. Tangible Assets of the firm are 14.00.000 and outside liabilities are
p 4,00,000. Profit of the firm is 1.50,000 and normal rate of return is
10%. The amount of Capital employed will be
(a) 10,00,000
(b) * 1,00,000
(c) 50,000
(d) 20,000
19
Income and Expenditure Account records :​

Answer 1

There are two ways of calculating capital employed:

1.  Non Current Assets + (Current Assets - Current Liabilities)

2.  Capital + Net Profit - Drawings + Non Current Liabilities

So we can use 1. as we have non current assets (tangible assets) and current liabilities (outside liabilities)

So Capital Employed is = 14,00,000 - 4,00,000

                                        = 1,00,000