# Capital Comparison Methods

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 + Takeout

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

Additional 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