Capital
In a sole trader’s accounts, capital is the owner’s residual interest in the business: assets less liabilities. It increases with owner investment and profit and decreases with drawings and losses. In company questions, share capital has a narrower meaning: the nominal amount of issued shares. Identify which meaning is intended before using a capital figure in a calculation.
Worked example
Opening capital of $30,000 plus profit of $8,000 and new investment of $2,000 less drawings of $5,000 gives closing capital of $35,000.
Common mistake
Capital is not a cash fund: it represents a claim on net assets, which may include inventory, equipment and receivables.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F3 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |