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How is the closing capital calculated in the final accounts of a sole trader?
How is the closing capital calculated in the final accounts of a sole trader?
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How is the closing capital calculated in the final accounts of a sole trader?
Opening Capital + Net Profit - Drawings
Opening Capital - Net Profit + Drawings
Net Profit - Drawings
Opening Capital + Drawings
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Closing capital is calculated as Opening Capital plus Net Profit minus Drawings.
Questions & Step-by-step Solutions
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Q: How is the closing capital calculated in the final accounts of a sole trader?
Solution:
Closing capital is calculated as Opening Capital plus Net Profit minus Drawings.
Steps: 5
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Step 1: Identify the Opening Capital. This is the amount of money the sole trader had at the beginning of the accounting period.
Step 2: Calculate the Net Profit. This is the total income earned minus total expenses during the accounting period.
Step 3: Determine the Drawings. This is the amount of money the sole trader took out of the business for personal use during the accounting period.
Step 4: Use the formula: Closing Capital = Opening Capital + Net Profit - Drawings.
Step 5: Plug in the values you found in Steps 1, 2, and 3 into the formula to get the Closing Capital.
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