Question

If capital at the end of the year is Rs. 40,000; Additional Capital introduced during the year Rs. 30,000; drawing for the year Rs. 20,000 and loss for the year is Rs. 60,000, then capital at the beginning of the year was:

• A. Rs. 90,000
• B. Rs. 80,000
• C. Rs. 70,000
• D. Rs. 10,000

Hint:

Capital at the beginning can be derived by adjusting additional capital, drawings, and profit/loss to the closing capital.

Answer 1

The Correct Option is A

The formula to calculate capital at the beginning of the year is:

Capital at Beginning = Capital at End − Additional Capital + Drawings + Loss

Given: - Capital at End = Rs. 40,000 - Additional Capital = Rs. 30,000 - Drawings = Rs. 20,000 - Loss = Rs. 60,000

Capital at Beginning = 40,000 − 30,000 + 20,000 + 60,000 = Rs. 90,000