A business commenced with Assets of $56,000 and Liabilities of $12,000. During the year, Income totalled $75,000, Expenses totalled $48,000 and Owner’s Drawings were $10,000. Based on this information, the Capital (Owner’s Equity) at the end of the year would be:[Fill in the blank]单项选择题
A
$44,000
B
$71,000
C
$73,000
D
$34,000
E
$61,000

Question

A business commenced with Assets of $56,000 and Liabilities of $12,000. During the year, Income totalled $75,000, Expenses totalled $48,000 and Owner’s Drawings were $10,000. Based on this information, the Capital (Owner’s Equity) at the end of the year would be:[Fill in the blank]单项选择题

A

$44,000

B

$71,000

C

$73,000

D

$34,000

E

$61,000

BlackTom AI · Accepted Answer

Owner’s equity changes by adding net income to the opening capital and subtracting owner’s drawings.

1. Relevant knowledge points and concepts
- Accounting equation: Assets = Liabilities + Owner’s Equity (Capital).
- Opening Capital = Opening Assets − Opening Liabilities.
- Change in Capital during the period = Net Income − Drawings, where Net Income = Revenues − Expenses.
- Ending Capital = Opening Capital + Change in Capital.

2. Complete reasoning process step by step
- Start with the given opening balances and results for the year.
- Compute opening capital from assets and liabilities.
- Compute net income from income and expenses.
- Apply drawings to arrive at ending capital.

3. Calculations with intermediate steps
- Opening Capital = Assets − Liabilities = $56,000 − $12,000 = $44,000.
- Net Income = Income − Expenses = $75,000 − $48,000 = $27,000.
- Change in Capital = Net Income − Drawings = $27,000 − $10,000 = $17,000.
- Ending Capital = Opening Capital + Change in Capital = $44,000 + $17,000 = $61,000.

4. Why the correct answer is correct
- The accounting logic shows capital increases by profits and decreases by owner withdrawals. Adding the net profit of $27,000 to the opening capital of $44,000 gives $71,000, but the owner withdrew $10,000 during the year, reducing capital to $61,000. This follows directly from the accounting equation and the definitions of net income and drawings.

5. Why the other options are incorrect
- $44,000: This is the opening capital only; it ignores the year’s profit and drawings.
- $71,000: This equals opening capital plus net income but fails to deduct drawings.
- $73,000 and $34,000: These do not correspond to any correct combination of the given figures (e.g., $73,000 would imply an incorrect net increase of $29,000; $34,000 implies incorrect subtraction of amounts).

6. Conclusion
- Therefore, the Ending Capital (Owner’s Equity) at year-end is $61,000, which matches the provided correct answer.

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