When closing capital is more than the opening capital, it denotes:
a) Profit
b) Loss
c) No profit no loss
d) Profit, if there is no introduction of fresh capital
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The answer is choice d) - Profit if there is no introduction of fresh capital.
Profit is defined as a financial gain or benefit that arises from a business activity as an excess of revenue gained from a business activity above expenses, cost and taxes incurred.
The opening capital is the amount of money and total value of assets that a company has at the beginning of a financial year. The closing capital, on the other hand, is the amount of money and the value of the total assets that a company has at the end of a financial year.
The factors that would lead to increase in the closing capital above the opening capital include:
- Gain in terms of profit
-Injection of capital by the company (introduction of fresh capital)
Therefore, if there is no introduction of fresh capital, the only other option that would lead for the closing capital to be more than the opening capital, is if there is financial gain by the company( which is profit).
Profit is defined as a financial gain or benefit that arises from a business activity as an excess of revenue gained from a business activity above expenses, cost and taxes incurred.
The opening capital is the amount of money and total value of assets that a company has at the beginning of a financial year. The closing capital, on the other hand, is the amount of money and the value of the total assets that a company has at the end of a financial year.
The factors that would lead to increase in the closing capital above the opening capital include:
- Gain in terms of profit
-Injection of capital by the company (introduction of fresh capital)
Therefore, if there is no introduction of fresh capital, the only other option that would lead for the closing capital to be more than the opening capital, is if there is financial gain by the company( which is profit).
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