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I n Accounting, Capital is neither an Asset nor Liabilities as it is the amount invested by sole owners in the business to start it or to grow it. As capital is the rights of sole owners of the business against the assets (resources) of the business so it is an internal liability of the business while liabilities are the external liabilities as these are the claims against the assets of the business from outsiders. In company or corporation’s business the term “ Equity ” is used to show the share capital of the owners of the business instead of capital account. So, capital is also known as Equity in case of Company or Corporation’s B usinesses while in case of Sole Proprietorship or Partnership, it is known as Owner’s Equity.

Any amount which is invested by the owner of the business into the business is called capital in sole proprietorship type of business. The owner may invest Cash or Goods (Goods Purchased or Purchases ) to start the business. For example, if Mr. A, as a Sole Owner, invested Cash For Rs. 100000 to start the business on 1 st July, 2018. then here Capital is the right of the owner who invested in his business. The Accounting Journal Entry for Capital account is shown below: Capital Journal Entry                                                             Cash a/c     100000                                                         ...