Ayush started business on 1st April, 1995 with a capital of Rs. 25,000 and a loan of Rs. 12,500. Total assets and liabilities at the end of 31st March, 1996 amounted to Rs. 75,000 and Rs. 12,500 respectively. He invested a further capital of Rs. 12,500 during the year and withdrew Rs. 7,500 during the relevant financial, period. His closing capital and profits would be respectively:

Answer: Option A

This question asks us to find two important things for a business: Closing Capital and Profit for the year.
Let's understand the key terms first:

Capital: This is the money the owner invests in the business.
Assets: These are things the business owns (like cash, goods, furniture, etc.).
Liabilities: These are what the business owes to others (like loans, bills, etc.).
Drawings: This is when the owner takes money or goods from the business for personal use.
Additional Capital: This is extra money the owner invests into the business during the year.

The fundamental rule in accounting is the Accounting Equation:
Assets = Liabilities + Capital

Let's solve it step-by-step:

Step 1: Calculate Closing Capital
The Closing Capital is the capital Ayush has at the end of the year (31st March, 1996).
We can find it using the accounting equation at the end of the year.
From Assets = Liabilities + Capital, we can rearrange it to find Capital:
Capital = Assets - Liabilities

At the end of the year (31st March, 1996), we are given:
Total Assets = Rs. 75,000
Total Liabilities = Rs. 12,500

So, Closing Capital = Rs. 75,000 (Assets) - Rs. 12,500 (Liabilities)
Closing Capital = Rs. 62,500

Step 2: Calculate Profit for the Year
To find the profit when we know the capital at the beginning and end, and also any additional capital or drawings, we use a specific formula:
Profit = (Closing Capital + Drawings) - (Opening Capital + Additional Capital)

Let's gather all the values we have:
Closing Capital: Rs. 62,500 (Calculated in Step 1)
Drawings: Rs. 7,500 (Money Ayush took out for personal use)
Opening Capital: Rs. 25,000 (Capital Ayush started with on 1st April, 1995)
Additional Capital: Rs. 12,500 (Extra money Ayush invested during the year)

Now, let's put these values into the formula:
Profit = (Rs. 62,500 + Rs. 7,500) - (Rs. 25,000 + Rs. 12,500)

First, sum the values in each bracket:
(Rs. 70,000) - (Rs. 37,500)

Now, subtract to find the profit:
Profit = Rs. 32,500

Therefore, Ayush's Closing Capital is Rs. 62,500 and his Profit for the year is Rs. 32,500.

This matches Option A: Rs. 62,500 and Rs. 32,500.