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Capital

The most important terms in time management

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What is capital?

Capital is normally referred to as the assets owned or needed by a company to provide their goods or services. When trying to define capital we refer to money, debts or the financial value of physical assets.

What is capital in accounting?

Your business needs a flow of money to operate but your capital is more durable and generates wealth through appreciation or dividends.

The meaning of capital can also be less tangible and include patents, software and brand names. These all have real value when doing your capital accounting.

What does capital mean in running a business?

For something to qualify for capital accounting it must provide an ongoing service to your business. If you invest in capital rather than taking money out for immediate consumption you help secure the future prosperity of your business.

What is a capital investment?

It might be your factory or office or a building with the potential to generate money to reinvest in production. When considering what is capital in accounting you need to be aware of depreciation on your tangible assets. Normal wear and tear is taken into account in financial statements and is usually offset against tax liabilities.

You can also buy or take over the debts of another business or individual. Repayments on this debt then become part of your capital accounting.

A capital account definition also needs to include equity based on investments with any dividend income being reinvested in your business.

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Related words

Bill

What is a Bill? A bill, also known as a bill of exchange, is an order that is used mainly in international trade. It obligates one party to pay a fixed amount of money to another party at a given date.

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Accounting Year

What is an Accounting Year? An accounting year is annual financial reporting period in which company organizes its financial data. It is useful when you are running a business. Potential shareholders analyze the company’s performance through its financial statements.

A Accounting system Accounting year

Gross Income

What is Gross Income? As a concept, gross income is exactly what it sounds like: the total of all sources of “gain” or revenue, before any considerations of deductions like expenses or taxes.

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Invoice Software

What is invoicing software? When a client buys goods or services, their detailed list of purchases is called an invoice. Invoice software works by calculating these various bills, sending them to respective customers, and organizing their receipts online for a simpler bookkeeping process.

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