Capital, Accounting Basics


In addition to borrowing from banks and additional sources, all companies obtain finance from their owners. This money is usually accessible for the life of the business and is usually only repaid when the company is "wound up". To differentiate among the liabilities owed to third parties and to the business owners, the later is referred to as the "equity capital" or "capital" of the company.  In adding, undistributed profits are re-invested in corporation assets (such as equipment, stocks and the bank balance). Though these "retained profits" may be obtainable for allocation to shareholders - and may be paid out as dividends at a future date - they are added to the impartiality capital of the business in arriving at the total "equity shareholders' funds".

At whatever time, so, the capital of a business is like to the assets (usually cash) established from the shareholders plus any profits completed by the company through trading that stay undistributed



Posted Date: 10/15/2012 5:35:47 AM | Location : United States

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