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.
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