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Question
Further capital introduced during the year is ____________ from closing capital in order to find out the correct profit.
Further capital introduced during the year is ____________ from closing capital in order to find out the correct profit.
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Solution
The correct option is B Deducted
Additional capital during the year is a result of working capital requirements and closing capital is the composition of profit or loss along with some capital contribution.
Hence, to remove the capital effect additional capital is deducted from closing capital in order to derive the correct profit or loss earned by the company.
Additional capital during the year is a result of working capital requirements and closing capital is the composition of profit or loss along with some capital contribution.
Hence, to remove the capital effect additional capital is deducted from closing capital in order to derive the correct profit or loss earned by the company.
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