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
Correct Answer: Capital Employed = Partners capital (including new partner's capital) + Free reserves + Profit & Loss (Cr.) - Existing goodwill - Fictitious Assets - Non trade Investment
Solution :
Capital Employed under Liabilities Approach
:
Capital Employed = Partners capital (including new partner's capital) + Free reserves + Profit & Loss (Cr.) - Existing goodwill - Fictitious Assets - Non trade Investment.
Hence, the correct option is 3.
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