Write a short note on capital, assets and liabilities.
- Capital: Capital is the amount invested by the proprietor in a business. If the business earns profit or invest additional amount, the capital amount increases in the business. On the other hand, if business incurs loss or withdraws the amount invested, the capital amount decreases.
- Assets: Assets are the properties of business used for its operation. It can be classified into fixed assets and current assets. Fixed assets are used for normal operations and are held on for long term basis such as land, building, plant and machinery. Current assets are held on short term basis and are converted into cash within a year such as debtors and stocks.
- Liabilities: Liabilities refer to financial obligations or debt which a business owes to others such as loans from banks, other persons or creditors for goods supplied. Long term liabilities are loans which are payable after a period of 1 year. Short term liabilities are obligations which are payable within a period of time.
You have rated this answer /10