Capital take it as you are the owner of business. Opening capital is the money you invest in your business let’s say 10000 so if after 3 months you decide to add some more 4000 then this added money is capital introduced and the first sum of money is the opening so in total your capital increased to 14000.
The opening capital is the capital at the start of the year in question.
In the first year of the business it will indeed be the capital introduced. However at the end of the year the closing capital will have changed (increased by the profit and decreased by the drawings) and this is then the opening capital for the following year. So each year the opening capital will be different.
I really enjoy your videos, I have been using them in my preparation for the last few months.
I do not understand this formula, I have watched the free lecture notes a few times but I have not seen this formula before. According to the free lecture notes Net Assets=Capital, so isn`t opening net assets the same as capital introduced?
Capital introduced implies that new capital has been added to an already existing balance of capital. Opening Net Assets can be thought of as Opening Capital balance.
Fambie10 says
Capital take it as you are the owner of business. Opening capital is the money you invest in your business let’s say 10000 so if after 3 months you decide to add some more 4000 then this added money is capital introduced and the first sum of money is the opening so in total your capital increased to 14000.
John Moffat says
That is correct, and at any point in time the total capital is quest to the net assets.
John Moffat says
The opening capital is the capital at the start of the year in question.
In the first year of the business it will indeed be the capital introduced. However at the end of the year the closing capital will have changed (increased by the profit and decreased by the drawings) and this is then the opening capital for the following year. So each year the opening capital will be different.
JoroG says
Hello,
I really enjoy your videos, I have been using them in my preparation for the last few months.
I do not understand this formula, I have watched the free lecture notes a few times but I have not seen this formula before. According to the free lecture notes Net Assets=Capital, so isn`t opening net assets the same as capital introduced?
Kind Regards
Astral says
Capital introduced implies that new capital has been added to an already existing balance of capital. Opening Net Assets can be thought of as Opening Capital balance.
If I’m wrong, kindly correct me 馃檪