WAEC - Accounts Principles Of Accounts (2023 - No. 27)
Beauty started business with ₦40,000, made a profit of ₦50,000 and ended the year with ₦70,000 capital. What would have accounted for the closing capital?
Drawings of ₦20,000 was made
The opening capital of ₦40,000 was invested
Beauty was paid a salary of ₦90,000
Cash shortage of ₦30,000 was recorded
Explanation
The calculation for closing capital is as follows:
Closing Capital = Initial Capital + Profit + Salary - Drawings - Cash Shortage
Closing Capital = ₦40,000 + ₦50,000 + ₦40,000 - ₦20,000 - ₦30,000
Closing Capital = ₦140,000 - ₦20,000 - ₦30,000
Closing Capital = ₦140,000 - ₦50,000
Closing Capital = ₦90,000
Therefore, the closing capital for Beauty would be ₦90,000.
Hence, the correct answer is ₦90,000.
Closing Capital = Initial Capital + Profit + Salary - Drawings - Cash Shortage
Closing Capital = ₦40,000 + ₦50,000 + ₦40,000 - ₦20,000 - ₦30,000
Closing Capital = ₦140,000 - ₦20,000 - ₦30,000
Closing Capital = ₦140,000 - ₦50,000
Closing Capital = ₦90,000
Therefore, the closing capital for Beauty would be ₦90,000.
Hence, the correct answer is ₦90,000.
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