In business, owner's capital, or owner's equity, refers to money that owners have invested into the business. In some instances, individuals prefer to finance activities through capital, rather than loans, to avoid facing any financial interest charges.When activities are financed through capital in a business, the profits must be paid to the owners.
The capital portion of the balance sheet is representative of money towards which business owners have a claim. However, this money is not distinctly owed to the owners as would be liabilities owed to banks or creditors. The equity represents the business owner's business investment without the amount of liabilities. The owner's equity may be seen as a source of business assets.
