Question

What is Capital Account?

Answer 1

The Capital Account represents the owner’s interest in the business and is classified as a personal account. It is credited when the owner introduces cash or assets or when the business earns net profit. It is debited for drawings made by the owner and for net loss. A credit balance in the capital account shows the amount the business owes to the owner, whereas a debit balance reflects the amount the owner is liable to pay to the business.