Question

Answer in One Sentence :

What is capital?

Answer 1

Capital is the amount invested by the proprietor in the business. According to the business entity concept, a business is considered as a separate entity from its owners. So, the amount invested becomes a liability for the business and is shown on the Liabilities side of the Balance Sheet. It is ascertained by deducting liabilities from the assets of the business i.e.
Capital = Assets - Liabilities