What is Capital or Business capital

What is Capital or Business capital?

In Accounting Capital is initial investment by the owner which he deposits to start his business. So this is not difficult to understand what is Business Capital and Term Capital.

Let me explain what Capital is:

1-    First Investment in any business by the owner is called Business Capital.

2-    Initial investment of owner in the business is known as Capital.

3-    Capital must be equal when you subtract total liabilities form total assets like this.

Capital = Total Assets – Total Liabilities

Is Capital or Equity the Same Term in Accounting?

No , No at all Equity and Capital are not the same terms in Accounting. Equity is the owner’s share of the assets of a business this share may be by the owners internal or external. But the Capital is Completely Owners investment in the business.

Basic Different of Capital and Equity Terms in Accounting:

Capital:

When owner invest in a business as assets to maintain the Operation activities of the Business called Capital. Initial investment in any business is known as capital of business.

Equity:

Term Equity Is may be on internal or external because someone who have share of assets of a business is called equity, in this situation owners may be on internal side or external.

Equity is same like investment but not capital.

Capital is special term for a newly investment in any kind of business while equity is the right of someone form business. Profits from a business are also part of equity. Profits are kept in accounts called reserves. Therefore equity consists of capital plus reserves (accumulated profits).

Related Question:

What is Capital? What is Business Capital? Define Term Capital? What is equity? What is business equity? What is different between Capital and Business Equity? What is formula of capital? How to Find Capital statement of Finding Capital?