What is Capital in Accounting?

What is Capital in Accounting?

No business can run without money or resources being invested therein.
Whatever money or resources from ones’ own pocket are put in a business is referred to as CAPITAL. Capital is the investment of the Owner in the business.

This capital or investment must earn a return or profit on its use even if it is coming out of ones’ pocket. This return is also known as PROFIT. So no capital should be without a profit or a return.
Also, no Capital even if coming from the business owner can be without cost. Why? Because if the same sum that was used in a business was put in the bank or used to buy Defence Savings or National Savings Certificates, a certain amount of profit would have been earned. By putting this money in business, a return must be expected.

For What is Expense in Accounting? Click Here or for What is Drawing? Click Here

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