Capital
We have seen previous in this section that the fundamental accounting equality states as:
Assets = liabilities + owners equity.
From the illustration of balance sheet we can simply establish this. Notice Ms. Naina's balance sheet as:
Total assets Rs. 1,00,00,000
Total liabilities Rs. 60,00,000
Owner's equity Rs. 40,00,000
We also identify that the owner's equity contains the contributed capital and the retained earnings of the firm. Thus, capital is that part of owner's equity that is contributed through the owners. If Ms. Naina were a particular proprietorship business, the owner's equity will be reflected directly as given below:
Capital Rs 40,00,000
Whether 'M/s. Naina' were a partnership firm along with 4 partners as W, X, Y and Z all sharing similarly, the capital would be shown as:
Capital Partner W Rs. 10,00,000
Partner X Rs. 10,00,000
Partner Y Rs. 10,00,000
Partner Z Rs. 10,00,000
Total Rs. 40,00,000