What is capital in accounting terms?


Quick Answer

Capital in accounting, according to Accountingverse, is the worth of the business after the total liabilities owed by a company is subtracted from that company's total assets. Capital may also be labeled as the equity in a company or as its net assets.

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What is capital in accounting terms?
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Full Answer

Capital is listed on the books according to the type of business it is referring to, according to Accountingverse. In those companies owned by a single individual, capital is referred to as owner's equity. In a partnership, it's known as partners' equity. Within a corporation, the capital is listed as stockholders' equity.

According to Accountingverse, the amount of a company's capital can be affected in four ways. The owners can invest more assets into a company, raising its net assets. These assets may include anything from equipment or buildings to direct cash infusions. The owners can also withdraw funds from the company in the form of dividends if the company is a corporation, or as direct cash withdrawals, lowering net assets. Income earned by the company can increase the available capital as well, as long as the income is greater than a company's expenditures. If the expenses for the business are higher than the income however, net assets are decreased by the amount of the loss.

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