Accounting Terms

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Capital is the amount invested by the owners in the business. It is also called owner's equity. It shows the owner's stake in the assets of the business. In a sole proprietorship, capital is contribut…

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Drawings are the amount of cash or goods taken by the proprietor from the business for personal or domestic use. They reduce the owner's stake in the business.

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An asset is anything owned by an individual or business that can be valued in money. Assets help the firm get cash or a benefit in future. Examples include land, building, machinery, furniture, stock,…

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Fixed assets are bought for use in the business, not for resale, such as land, building, machinery, computer, furniture, vehicles, and live stock. Current assets are expected to be converted into cash…

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Liability means an amount that the business owes to proprietors and outsiders. It is the claim against the assets of the business. Liabilities are the obligations or debts payable by the business unit…

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External liabilities are amounts owed to outsiders for goods purchased on credit, for expenses, or for loans taken. Examples include sundry creditors, bills payable, outstanding salaries, rent due, ba…

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Capital is the proprietor's claim against the assets of the business. Since the business owes this amount to its owner, capital is an internal liability. In a sole proprietorship, the proprietor contr…

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Accounting Equation: Assets = Capital + Liabilities. Assets are the total resources owned by the business. Capital is the owner's investment and is an internal liability. Liabilities are obligations t…