CA Foundation · Accounting · Theoretical Framework
A trader's opening capital was ₹6,00,000. During the year he introduced further capital of ₹1,00,000, withdrew ₹70,000 for personal use, and earned a net profit of ₹1,50,000. What is his closing capital?
Closing capital is ₹7,80,000. Add the additional capital of ₹1,00,000 and the profit of ₹1,50,000 to the opening ₹6,00,000, then deduct drawings of ₹70,000. Drawings reduce the owner's claim on the business, so they must be subtracted.
- A₹7,80,000Correct
- B₹8,20,000
- C₹7,50,000
- D₹6,80,000
Explanation
Closing capital = Opening capital + Additional capital + Profit - Drawings = 6,00,000 + 1,00,000 + 1,50,000 - 70,000 = 7,80,000. The option ₹8,20,000 results from ignoring drawings, which is wrong because drawings reduce capital.
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