What is Capital?

Capital is money invested in a business

How it Works

To start a business, a business owner may use some of their own capital.

They would deposit this money in the business’s bank account.

​If the owner was a corporation, the money would come from stockholders.

Once received, the business may use this capital to buy assets, such as equipment or buildings.

​It may also use some of the money to buy inventory.

Recording Capital

When recording the transaction, you need to show the flow of money from one account to the other.

Here, you credit the capital account.

This shows money came from capital.

After that, you debit the checking account.

This shows the money went to the bank.

© R.J (Bob) Hickman 2020

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