prepayment

This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.

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March 16, 2020 at 4:56 am #565295
beticopper
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when we have a prepaid expense ,net profit increases and we know that when net profit increases capital also increases so how capital remains unchanged when we have a prepaid expense?
March 16, 2020 at 7:14 am #565299
John Moffat
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The capital is displayed separately from the profit for the year.
March 17, 2020 at 9:09 am #565338
beticopper
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don’t we add profit to the opening capital to reach the closing capital?
March 17, 2020 at 5:52 pm #565357
John Moffat
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For a sole trader, yes we do (but not for a limited company). However on the SOFP we still show the opening capital and the profit for the year separately.
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