A sole trader began the year with capital of £50,000, made a net profit of £35,900, took drawings of £18,000 and introduced a further £5,000 of capital during the year. What is the closing capital?
Answer and explanation
Correct answer: B. £72,900
- Step 1: Capital increases with profit and capital introduced, and decreases with drawings.
- Step 2: £50,000 + £35,900 + £5,000 - £18,000 = £72,900.
Answer
£72,900.
Why not the others: £67,900 omits the additional £5,000 introduced. £108,900 adds the drawings instead of deducting them. £62,900 deducts the capital introduced instead of adding it.
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