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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

In the balance sheet of a sole proprietor prepared in the conventional (account) form, where is the closing capital normally shown?

Closing capital is shown on the liabilities side of the balance sheet because it represents the amount the business owes to its proprietor. It equals opening capital plus profit and fresh capital less drawings and losses.

  1. AOn the assets side
  2. BOn the liabilities sideCorrect
  3. CIn the trading account
  4. DAs a deduction from sales

Explanation

Capital is the amount the business owes to the proprietor, so it is a liability to the owner. It is shown on the liabilities side after adding net profit and deducting drawings. It is never an asset or part of trading account items.

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