Concept:In incomplete records, a decrease in capital over an accounting period generally indicates a loss.
Explanation:Opening capital is the capital at the start of the period.
Closing capital is the capital at the end of the period.
If opening capital is greater than closing capital, the net assets of the business have reduced.
This reduction in capital is treated as a loss unless it is due to drawings or fresh capital.
The formula is:
Profit or Loss
=Closing Capital+Drawings−Additional Capital−Opening CapitalWhen opening capital exceeds closing capital, the result is negative, which means a loss has been incurred.
Therefore, the excess of opening capital over closing capital represents a loss.
Answer:B. loss.