Owner, Juan invested an initial capital amounting ₱50,000 in order to put up his janitorial services company. During the first year of operations (2016), the company had a loss of ₱25,000. Because of this, Juan invested additional capital amounting to ₱50,000 in 2017. In the second year (2017), the company had a net income of ₱100,000 and Juan withdrew ₱10,000 for personal use. Compute for the ending capital balance of Juan for the year 2017.

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.