Capital represents the wealth an individual puts into a business. It is computed by determining the monetary value of the business assets minus its liabilities. Money is a debt owed to someone by someone so capital is actually the debt a person owns (as distinct from owes) that is tied up in a business.

We can write the formula for determining Capital as

Capital = Assets - Liabilities  or as ...

Capital = debt owned or owed to self - debt owed to others

 

 


What Is Capital