Capital equals total assets minus total liabilities

Steps:

• Identify assets: motor car $2,500 + inventory$5,000 + loan to friend $1,000 =$8,500 total assets.
• Identify liabilities: bank overdraft $500.
• Apply accounting equation: capital = total assets - liabilities.
• Compute: $8,500 -$500 = $8,000.

Why C is correct:

• The accounting equation (Assets = Capital + Liabilities) directly yields capital as $8,000 when including all business assets and liabilities.

Why the others are wrong:

• A: Ignores motor car and loan, using only inventory value.
• B: Excludes loan to friend as a business asset, understating assets by $1,000.
• D: Matches C but listed separately, possibly a duplicate option.

Final answer: C. $8000