Opening capital balances of partners will be calculated by using which of the following formula:-
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Closing Capital - Addition to the Capital + Withdrawal of Capital - interest on Capital + Drawings + interest on drawings + Share of Loss - Share of Profit
Opening capital is found by working backwards from closing capital: every item that increased capital during the year is taken out, and every item that reduced it is put back.
Items that increased capital, so are deducted: additional capital introduced, interest on capital, share of profit
Items that reduced capital, so are added back: capital withdrawn, drawings, interest on drawings, share of loss
Why the other options are incorrect
Option (1) Closing Capital - Addition to the Capital + Withdrawal of Capital - interest on Capital + Drawings + interest on drawings + Share of Loss + Share of Profit — Incorrect. It adds the share of profit, which increased capital and must be deducted.
Option (2) Closing Capital - Addition to the Capital + Withdrawal of Capital - interest on Capital + Drawings + interest on drawings - Share of Loss - Share of Profit — Incorrect. It deducts the share of loss, which reduced capital and must be added back.
Option (4) Closing Capital - Addition to the Capital + Withdrawal of Capital + interest on Capital + Drawings + interest on drawings + Share of Loss - Share of Profit — Incorrect. It adds interest on capital, which was credited to capital and must be deducted.
NCERT (2026-27 edition): |