Capital is vital to any business, and securing the amount needed to run your business could make all the difference in terms of overall success. Whether you run a small LLC or a large corporation, keeping a capital account can be useful.

Understanding Capital

Capital is not a complicated business term. It is simply used to reference the wealth or money required to produce services and products. This money is needed for daily operations, as well as for acquiring the assets necessary to accomplish this.

What Is a Capital Account?

A capital account reflects the accurate accounting of what the owners of a business contribute and take from it. It may include entries for both property and money, and it is displayed on a balance sheet. This kind of account is also referred to as an equity account. This account should accurately depict the amount of money that each owner added at the onset of starting a business. If the business loses money in a given year, that amount will be recorded via the equity account.

Accounting for Contributions

When a business partner, owner, or shareholder makes contributions of property or money, these are referred to as capital contributions. The property involved might take the form of items such as equipment, a vehicle, or a computer, for example.

Taking money out of a capital account is also allowed, but there may be some limitations regarding frequency or amounts.

The Benefit of a Capital Account

By keeping an account of this kind, you could improve your chances of getting a loan. The fact that the owners have invested in business demonstrates that they are not likely to walk away during tougher times.

As a potential business owner, you may need assistance in providing capital for your business. Contact Simplicity Capital Finance today, and we will be happy to help you explore the lending options available to your business.