A business has a motor vehicle worth £5,000 and equipment worth £10,000. It has £500 cash. The business owes £10,000 to its suppliers and is owed £25,000 from its customers, has a £500 overdraft and has £1,000 outstanding on a loan. How much capital does the business have?

Question

Quizplus · Accepted Answer

Capital is calculated as total assets minus total liabilities. Total assets are £5,000 (motor vehicle) + £10,000 (equipment) + £500 (cash) + £25,000 (owed by customers) = £40,500. Total liabilities are £10,000 (owed to suppliers) + £500 (overdraft) + £1,000 (loan) = £11,500. Therefore, capital is £40,500 - £11,500 = £29,000.

A Business Has a Motor Vehicle Worth £5,000 and Equipment