Mr Manu started a business with the capital 4 lakh on 1st October 2005...
Initial Investment
- Mr. Manu's initial capital: 4,00,000
- Amount borrowed from a friend: 1,00,000
- Additional capital introduced on 31st March 2006: 75,000
Total Capital Invested
- Total capital by 31st March 2006: 4,00,000 + 1,00,000 + 75,000 = 5,75,000
Business Position as of 31st March 2016
- Cash: 30,000
- Stock: 4,70,000
- Debtors: 3,50,000
- Creditors: 3,00,000
Current Assets Calculation
- Total current assets: Cash + Stock + Debtors
- Total current assets: 30,000 + 4,70,000 + 3,50,000 = 4,90,000
Current Liabilities Calculation
- Total current liabilities: Creditors
- Total current liabilities: 3,00,000
Net Assets Calculation
- Net assets = Total current assets - Total current liabilities
- Net assets = 4,90,000 - 3,00,000 = 1,90,000
Capital Gains Calculation
- Total capital invested: 5,75,000
- Closing net assets: 1,90,000
Profit or Loss Determination
- Profit or Loss = Closing Net Assets - Total Capital Invested
- Profit or Loss = 1,90,000 - 5,75,000 = -3,85,000
Conclusion
- Mr. Manu incurred a loss of 3,85,000 during the period from October 2005 to March 2016.