Hi In Ques 33.7,to calculate the Return on capital pls explain that how is the figure for free reserves at start of the year obtained i:e 500-66? Thanks in advance!
Hi This is the amount of surplus assets (= excess of assets over liabilities) at the start of the year. Surplus assets at end of year = 2,600 - 2,100 = 500 Change in surplus assets over the year = surplus arising over the year = profit earned during the year = 66 So if year end surplus = 500 and we know that the surplus increased by 66 during the year, we must have start year surplus = 500 - 66 = 434 Hope that helps
