• 1 Marks

FA – Nov 2012 – L1 – SA – Q15 – Financial Statements Preparation

Determining the outcome when opening capital is higher than closing capital.

If the opening capital is higher than the closing capital, the business has made:

A. Profit during the year
B. Profit during the year before changes in equity
C. Loss during the year after adjustment for non-current assets
D. Loss during the year before adjustment for drawings
E. Profit during the year without adjustment for drawings

D. Loss during the year before adjustment for drawings

Explanation:
The correct answer is D because if the opening capital exceeds the closing capital, the business has likely experienced a loss. The adjustment for drawings will affect the final outcome, but without it, the situation indicates a loss.

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