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Ch 33 Q33.7

N

Nimisha

Member
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
 
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