The Amount Of Current Capital Is Calculated As Follows: Capital Account Balance + Net Income - Drawing Account Balance = Current Capital | True Or False?

Calculation Of Ending Capital Or Capital For The Current Accounting Period

The answer of this true & false question is “True”, as in the case of Sole Proprietorship, the Current Capital or Capital (C) for the current accounting period is calculated by adding Net Income / Net Profit for the accounting period to Beginning Capital (BC) and deducted Drawings During the period from BC.

In this way, the sole owner knows the changes in capital over the accounting period i.e., whether BC increased or decreased during the period. If it increases, then it is the results of profitable activities of the business otherwise, these business activities are not profitable i.e., revenues are less than expenses and as a result business suffers a loss during the accounting period.