Where a firm has not kept proper books of account, an increase in closing capital over opening capital represents
Answer Details
If a firm has not kept proper books of account, an increase in closing capital over opening capital represents a profit. This is because closing capital represents the value of a firm's assets after all liabilities have been paid. When the closing capital is higher than the opening capital, it means that the firm has earned more money during the period than it has spent.
In a proper accounting system, the profit is calculated by subtracting the total expenses from the total revenue. However, in the absence of proper books of account, it is not possible to determine the exact amount of profit or loss. Therefore, an increase in closing capital is used as an indicator of profit.
It is important to note that the increase in closing capital may also be due to other factors such as capital contributions, sale of assets, or reduction in liabilities. However, in the absence of proper books of account, it is assumed that the increase in closing capital is primarily due to profit.
In summary, an increase in closing capital over opening capital in a firm that has not kept proper books of account represents a profit.