Under the net worth method, the basis for ascertaining profit or loss is the difference between _______________.
A
Gross assets on two dates
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B
Net assets on two dates
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C
Capital on two dates
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D
Liabilities on two dates
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Solution
The correct option is C Capital on two dates Profit or loss earned by the business under single entry system is based on the difference between its Opening and closing capital. Opening Capital is the capital on 1st Day of financial year Closing Capital is the capital on last Day of financial year if Closing capital is More it indicates Profit and vice-versa hence to ascertain Profit or loss under this method difference if two dates are taken.