Question

When closing capital is greater than opening capital, it denotes :

• A. Profit
• B. Loss
• C. Profit if there is no introduction of fresh capital
• D. No profit no loss

Answer 1

Answer:

C. Profit if there is no introduction of fresh capital

When closing capital is greater than opening capital it denotes profit if there is no introduction of new capital in the business. Opening capital is the capital at the beginning of the year and closing capital is the capital at the end of the year. The only reason for there being an increase in capital can be either profit or introduction of capital, if there is no introduction of capital it will be profit earned.