Question : Capital employed in a firm is calculated from assets side approach as follows:
Option 1: All assets – goodwill – non trade investment – fictious assets – long term outside liabilities
Option 2: All assets – goodwill – non trade investment – fictious assets – credit balance in cuirrent account – all outside liabilities
Option 3: Partners capital – credit balance in current account + free reserve + credit balance of profit a and loss account – Goodwill – non trade investment – fictious assets – all outside liabilities
Option 4: All assests – goodwill – Non trade investment – fictious assets – Debit balance of profit and loss account – outsiders liabilities
Correct Answer: All assests – goodwill – Non trade investment – fictious assets – Debit balance of profit and loss account – outsiders liabilities
Solution : Answer = All assets – goodwill – Non-trade investment – fictitious assets – A debit balance of profit and loss account – outsiders liabilities
Capital employed in a firm is calculated using the assets side approach, which involves subtracting certain items from total assets. These deductions typically include goodwill, non-trade investments, fictitious assets, debit balance of profit and loss account, and outside liabilities. This method aims to determine the net amount of capital invested in the business. Hence, the correct option is 4.
Question : Capital employed in a firm is calculated from the liabilities approach as follows
Option 1: Partner's capital – credit balance in current account + free reserve + credit balance of profit and loss account – Goodwill - Non trade investment – fictitious assets – all outside liabilities
Option 2: Partners capital + credit balance in current account (minus Debit balance of current account) + free reserve + credit balance of profit and loss (if any) – goodwill – non trade investment
Option 3: Partners capital – credit balance in current account + free reserve + credit balance of profit and loss account – Goodwill – non trade investment – fictitious assets – all outside liabilities
Question : Capital employed in a firm is calculated from the liabilities approach as follows:
Option 1: Capital Employed = Total Assets (excluding goodwill) – Outside Liabilities
Option 2: Capital Employed = Fixed Assets + Working Capital
Option 3: Capital Employed = Partners capital (including new partner's capital) + Free reserves + Profit & Loss (Cr.) - Existing goodwill - Fictitious Assets - Non trade Investment
Option 4: All of the above
Question : In the case of fixed capital, partners will have
Option 1: credit balance for their capital account
Option 2: debit balance of their capital account
Option 3: credit and debit balance in their capital account
Option 4: credit balance or Nil balance in their capital account
Question : In a Company Balance Sheet, the credit (profit) balance of the Statement of Profit and Loss is shown under:
Option 1: Reserve and Surplus
Option 2: Current Liabilities
Option 3: Non-current Assets
Option 4: Non-current Liabilities
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