Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of Sole Proprietorship

A sole trader's balance sheet shows total assets of Rs 9,50,000. Outstanding salaries are Rs 25,000, creditors Rs 1,75,000, a bank loan Rs 2,00,000 and bills payable Rs 50,000. What is the proprietor's capital?

The proprietor's capital is Rs 5,00,000. Add all outside liabilities, namely salaries, creditors, bank loan and bills payable, to get Rs 4,50,000, then subtract from total assets of Rs 9,50,000. Capital is the residual claim of the owner under the accounting equation.

  1. ARs 5,00,000Correct
  2. BRs 4,75,000
  3. CRs 5,25,000
  4. DRs 3,00,000

Explanation

Total outside liabilities = 25,000 + 1,75,000 + 2,00,000 + 50,000 = 4,50,000. Capital = Assets - Liabilities = 9,50,000 - 4,50,000 = Rs 5,00,000. Rs 5,50,000 would result from omitting bills payable, and Rs 4,75,000 results from omitting outstanding salaries.

Did you get it right without looking?

One question tells you little. A timed set on Financial Statements of Sole Proprietorship shows your real accuracy, how long you take and where you lose marks.

Practise Financial Statements of Sole ProprietorshipFree diagnostic mock

More Financial Statements of Sole Proprietorship questions