Which of the following is added to the proprietor's capital?
Answer Details
Net profit is added to the proprietor's capital.
Net profit is the amount by which total revenue exceeds total expenses during a certain period of time. This amount represents the profit that the business has earned after deducting all of its expenses, including the cost of goods sold, operating expenses, and taxes. Since the proprietor is the owner of the business, any profit earned by the business belongs to the proprietor and is added to their capital.
On the other hand, gross profit is the profit earned by a business before deducting its operating expenses, while net sales are the total revenue earned by a business from the sale of goods or services after deducting any discounts or returns. Neither of these figures represent the amount that can be added directly to the proprietor's capital.