Capital Account

Capital Account

The capital account is a separate account used to track the balances of accounts that are in the nature of capital and are not used in the ordinary course of business operations. Typically, the capital account includes items such as

• Owner’s capital
• Accounts payable but not yet paid
• Accounts receivable but not yet collected
• Long-term investments
• Equipment and other assets used for investment purposes

Purpose of the Capital Account:

• To separate capital accounts from current accounts and assets used in operations.
• To ensure clear and accurate accounting of capital assets and liabilities.
• To facilitate the preparation of financial statements according to generally accepted accounting principles (GAAP).
• To provide a more complete and transparent view of the company’s financial position and performance.

Example:

Capital AccountOwner's capital $100,000Accounts payable $20,000Accounts receivable $30,000Long-term investments $40,000Equipment $50,000

Note:

It is important to note that the specific items included in a capital account may vary depending on the company and industry. However, the general purpose of the capital account remains the same.