Question

 Under Single Entry System, additional capital brought in during the year is _____ closing capital in order to calculate profit.

Options

• added to

• deducted from

•  added twice to

• deducted twice from

Answer 1

Under Single Entry System, additional capital brought in during the year is deducted from closing capital in order to calculate profit.

Explanation:

Fresh capital refers to the amount of additional capital (or new capital) that has been invested by the trader during the year. In order to ascertain profit or loss, we deduct fresh capital from the closing capital balance. This is simply because the addition in the capital balance is due to introduction of fresh capital and not because of the profits.

Hence, the correct answer is option (b).