A sole trader has opening capital of Rs. 300,000, profit of Rs. 80,000, drawings of Rs. 25,000 and additional capital of Rs. 40,000 during the year. What is the closing capital?
Correct answer: C. Rs. 395,000
- A. Rs. 315,000
- B. Rs. 355,000
- C. Rs. 395,000
- D. Rs. 445,000
Explanation
Closing capital equals opening capital plus profit and additional capital less drawings. Thus, Rs. 300,000 + Rs. 80,000 + Rs. 40,000 − Rs. 25,000 = Rs. 395,000.
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About Financial Statements of Sole Traders
Sole trader statements calculate revenue, cost of sales, gross profit, operating expenses and net profit, then present assets, liabilities and owner’s capital in the statement of financial position. Adjustments for closing inventory, accruals, prepayments, depreciation, bad debts, drawings and additional capital connect the two statements.
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