If a sole trader's net profit is $20,000 and drawings are $5,000, what is the closing capital?
Practice Questions
1 question
Q1
If a sole trader's net profit is $20,000 and drawings are $5,000, what is the closing capital?
$15,000
$20,000
$25,000
$30,000
Closing capital is calculated as net profit plus opening capital minus drawings. Assuming opening capital is $10,000, it would be $20,000 + $10,000 - $5,000 = $25,000.
Questions & Step-by-step Solutions
1 item
Q
Q: If a sole trader's net profit is $20,000 and drawings are $5,000, what is the closing capital?
Solution: Closing capital is calculated as net profit plus opening capital minus drawings. Assuming opening capital is $10,000, it would be $20,000 + $10,000 - $5,000 = $25,000.
Steps: 7
Step 1: Identify the net profit, which is given as $20,000.
Step 2: Identify the drawings, which are given as $5,000.
Step 3: Assume the opening capital, which is given as $10,000.
Step 4: Use the formula for closing capital: Closing Capital = Net Profit + Opening Capital - Drawings.
Step 5: Substitute the values into the formula: Closing Capital = $20,000 + $10,000 - $5,000.
Step 6: Calculate the result: $20,000 + $10,000 = $30,000; then $30,000 - $5,000 = $25,000.
