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.