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JAMB Principles of Accounts 2006 Question 7

Question 7

Accounting Equation

Capital ₦?
Profit and loss ₦3 500
Current assets ₦?
Current liabilities ₦2 000
Fixed assets ₦11 000
The company maintains a current ratio of 3:1.
The capital balance is

  1. A.₦9 500
  2. B.₦12 500
  3. C.₦11 500
  4. D.₦10 000
Show the answer and explanation

Answer: C (₦11 500)

Explanation

Current assets = 3 × current liabilities = ₦6 000. Capital + profit + liabilities = assets, so capital = (11 000 + 6 000) − 2 000 − 3 500 = ₦11 500.