Question

Ram commenced the business on 1-4-2015. On 31st March, 2016 his Assets -Rs.5,00,000 and Liabilities-Rs.2,00,000. His profit during the year amounted to Rs.1,00,000. He withdrew Rs.50,000 for his private use from the business. What will be his opening capital?
a) Rs.3,50,000
b) Rs.2,50,000
c) Rs.3,00.000
d) Rs.4,50,000 ​

Answer 1

Option A is the correct answer.

Assets = Capital + Liabilities

5,00,000 = Capital + 2,00,000

Capital = 5,00,000 - 2,00,000

Capital = 3,00,000

Profit is always added to capital ,

3,00,000 + 1,00,000 = 4,00,000

Drawings are always reduced from capital,

4,00,000 - 50,000 = 3,50,000

Hence, ₹ 3,50,000 will be the opening capital.

Hope it helps you!!!

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Answer 2

Explanation:

closing capital = closing assets - closing liabilities

500000-200000=300000

opening capital =closing capital -profit +drawings

300000-100000+50000=250000