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To calculate capital we make capital the subject of the formula as shown below.
Capital $=$ Assets - Liabilities
Example 14.1
Ishmael Mangwarira a sole trader does not keep proper books of accounts and he is not aware of his opening capital. The newly employed bookkeeper asked his non-current asset register and he provides the following information as on 1 January 2016.
| 1 January, 2016 | 31 December, 2016
| $ | $
Motor vans | 16000 | 16000
Equipment | 12000 | 12000
Inventory | 5000 | 7000
Trade receivables | 10000 | 9000
Trade payables | 6000 | 4000
Cash at hand | 4500 | 8100
Rent owing | 1600 | -
Electricity paid in advance | 100 | 200
Ishmael is aware that he paid $$ 12000$ cash to his suppliers and $$ 17000$ cash was received from customers during the year. Required: Calculate the firm's capital as at 1 January, 2016.
\begin{table}
\captionsetup{labelformat=empty}
\caption{Solution}
Assets | $ | $
Motor vans | 16000 |
Equipment | 12000 |
Inventory | 5000 |
Trade receivables | 10000 |
Cash at hand | 4500 |
Electricity paid in advance | 100 | 47600
Liabilities | &
Trade payables | 6000 |
Rent owing | $\underline{1600}$ | 7600
Capital | & 40000
\end{table}
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