Capital The capital of a business entiry is the amount that the business owes its owner.capital represents the owners' equity or investment in the business. Other terms which can be used synonymously are Owner's equity and proprietorshipCapitalAlso known as net assets or equity, capital refers to what is left to the owners after all liabilities are settled. Simply stated, capital is equal to total assets minus total liabilities. Capital is affected by the following:Initial and additional contributions of owner/s (investments),Withdrawals made by owner/s (dividends for corporations),Income, andExpenses.Owner contributions and income increase capital. Withdrawals and expenses decrease it.The terms used to refer to a company's capital portion varies according to the form of ownership. In a sole proprietorship business, the capital is called Owner's Equity or Owner's Capital; in partnerships, it is called Partners' Equity or Partners' Capital; and in corporations, Stockholders' Equity.In addition to the three elements mentioned above, there are two items that are also considered as key elements in accounting. They are income and expense. Nonetheless, these items are ultimately included as part of capital.1.Wealth in the form of money or assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment.2.Accounting: Money invested in a business to generate income.
3.Economics: Factors of production that are used to create goods or services and are not themselves in the process.
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