Explain the approaches of proprietary funds.

1.	Explain the approaches of proprietary funds.
Answer» There are two approaches used to determine the owner’s funds. Under both the approaches owners’ funds remain identical. 1. Liabilities Based Approach: As per this approach ; Owners’ funds = Equity share capital + Preference share capital + Reserves and surplus – Debt balance of P & L A/c (if any). 2. Assets Based Approach: As per this approach ; Owners’ funds = Non-current Assets + Current Assets – Non-current liabilities – Current liabilities.

Answer»

There are two approaches used to determine the owner’s funds. Under both the approaches owners’ funds remain identical.

1. Liabilities Based Approach:

As per this approach ;
Owners’ funds = Equity share capital + Preference share capital + Reserves and surplus – Debt balance of P & L A/c (if any).

2. Assets Based Approach:

As per this approach ;
Owners’ funds = Non-current Assets + Current Assets – Non-current liabilities – Current liabilities.

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