Answer & Solution
Answer: Option
A
Solution:
This question asks us to find two important things for a business: Closing Capital and Profit for the year.
Let's understand the key terms first:
Capital: This is the money the owner invests in the business.
Assets: These are things the business owns (like cash, goods, furniture, etc.).
Liabilities: These are what the business owes to others (like loans, bills, etc.).
Drawings: This is when the owner takes money or goods from the business for personal use.
Additional Capital: This is extra money the owner invests into the business during the year.
The fundamental rule in accounting is the Accounting Equation:
Assets = Liabilities + Capital
Let's solve it step-by-step:
Step 1: Calculate Closing Capital
The Closing Capital is the capital Ayush has at the end of the year (31st March, 1996).
We can find it using the accounting equation at the end of the year.
From Assets = Liabilities + Capital, we can rearrange it to find Capital:
Capital = Assets - Liabilities
At the end of the year (31st March, 1996), we are given:
Total Assets = Rs. 75,000
Total Liabilities = Rs. 12,500
So, Closing Capital = Rs. 75,000 (Assets) - Rs. 12,500 (Liabilities)
Closing Capital = Rs. 62,500
Step 2: Calculate Profit for the Year
To find the profit when we know the capital at the beginning and end, and also any additional capital or drawings, we use a specific formula:
Profit = (Closing Capital + Drawings) - (Opening Capital + Additional Capital)
Let's gather all the values we have:
Closing Capital: Rs. 62,500 (Calculated in Step 1)
Drawings: Rs. 7,500 (Money Ayush took out for personal use)
Opening Capital: Rs. 25,000 (Capital Ayush started with on 1st April, 1995)
Additional Capital: Rs. 12,500 (Extra money Ayush invested during the year)
Now, let's put these values into the formula:
Profit = (Rs. 62,500 + Rs. 7,500) - (Rs. 25,000 + Rs. 12,500)
First, sum the values in each bracket:
(Rs. 70,000) - (Rs. 37,500)
Now, subtract to find the profit:
Profit = Rs. 32,500
Therefore, Ayush's Closing Capital is Rs. 62,500 and his Profit for the year is Rs. 32,500.
This matches Option A: Rs. 62,500 and Rs. 32,500.
