1. The business may assess its profit or loss by comparing the final capital with its initial capital for an accounting period.

2. If the final capital is more than the initial capital, profit is earned. On the other hand, if the final capital is less than the initial capital, losses are experienced.

3. Business capital decreases if there is:

(a) net profit

(b) additional capital by the owner

4. Business capital decreases if there is:

(a) net loss

(b) takeout by the owner

5. Computation of net profit if there is no takeover and additional capital is:

**Net profit = Final capital – Initial capital **

**Calculating Left Behind Number**

1. From the following equation,

**Final capital = Initial capital + Net profit + Additional capital – Takeout** *any left figure can be calculated*

**Net profit = Final capital – Initial capital – Additional capital + TakeoutInitial capital = Final capital – Net profit – Additional capital + TakeoutAdditional capital = Final capital – Initial capital – Net profit + Takeout **

**Takeout = Initial capital + Net profit + Additional capital – Final capital**

*If there is a net loss,*

**Final capital = Initial capital – Net loss + Additional capital – Takeout**

**Calculating Capital If Assets and Liabilities Amount Given**

1. If assets and liabilities are granted, the capital can be calculated using the following formula: **Capital = Total assets- Total liability**

2. The capital calculation must take into account the following:

(a) assets such as past expenditure and accrued revenue

(b) liabilities such as accrued expenses, past proceeds, and bank overdrafts.

(c) depreciation provisions on fixed assets that must be deducted from the cost of the fixed assets.

(d) the provision for doubtful debts that must be deducted from the amount of the debtor