A Level Accounting (9706)•9706/13/O/N/21
Explanation
Closing capital balance calculation Steps:
- Identify opening capital balance from the statement of affairs or prior year.
- Add net profit for the year, calculated as total revenues minus total expenses.
- Subtract owner's drawings or withdrawals during the year.
- Result is the closing capital balance at year-end.
Why B is correct:
- Closing capital = opening capital + net profit - drawings; this formula yields $53,450 based on the given account figures.
Why the others are wrong:
- A omits net profit addition.
- C includes drawings as an addition.
- D double-counts net profit.
Final answer: B
Topic: Preparation of financial statements
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