When only closing and opening capital is given and closing capital is greater than opening capital it denotesa)Profitb)Profit if there is no introduction of fresh capitalc)Lossd)NoneCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Yes b is right answer as new capital not come and increase in capital therefor we r in profit

Answer

If opening capital is less than closing capital or closing capital is greater than capital then it is. profit....... if closing capital is less than opening capital or opening capital is greater than closing capital it is loss then it is loss................. so correct answer is b

Answer

Explanation:

Opening Capital: Opening capital refers to the amount of capital invested by the owner or owners at the beginning of an accounting period. It represents the initial investment made by the owner(s) in the business.

Closing Capital: Closing capital refers to the amount of capital remaining at the end of an accounting period after considering the profit or loss incurred during that period. It represents the total investment made by the owner(s) in the business at the end of the accounting period.

When only the opening and closing capital is given and the closing capital is greater than the opening capital, it denotes a profit if there is no introduction of fresh capital during the accounting period.

Reasoning:

The difference between the closing capital and the opening capital represents the profit or loss incurred during the period. If the closing capital is greater than the opening capital, it indicates that the business has made a profit.

Illustration:

Let's consider an example to understand this concept:

Opening capital: $10,000
Closing capital: $12,000

In this case, the difference between the closing capital and the opening capital is $2,000 ($12,000 - $10,000). Since the closing capital is greater than the opening capital, it indicates a profit of $2,000.

Conclusion:

Therefore, when only the opening and closing capital is given and the closing capital is greater than the opening capital, it denotes a profit if there is no introduction of fresh capital during the accounting period.

Answer

Closing capital means the capital which we have in the end of the accounting period.Therefore closing capital can be greater than opening captial in two case first when the additional or fresh capital is introduced in the business or when the profit is earned and decrease in capital is caused by the loss incured .Hence the correct option is 'b'

Answer

Yes as capital rises only in 2 conditions
if there is profit or
if additional capital is introduced

Similar Commerce Doubts

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If opening capital of a partner in the form is 100000 and closing capital is 200000 interest on capital allowed during the year 10000 and interest on drawings charged during the year 2005 total runs over 20,000 amount of profit transferred to is capital account by the firm would be?

When nothing is written along with capital , is it closing capital or opening capital?

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