Assets and Liabilities

An asset is something valuable which a business owns or has the use of, such as factories, office buildings, vehicles, computers, stock and so on.

A liability is something which is owed to somebody else.  A liability is a debt of the business, such as a bank loan or overdraft, amounts owed to suppliers or taxation owed to the government.

Capital is a special liability.  Capital the money that the owners put into a business, with the intention of earning a return.  Therefore, capital is money that is owed to the owners by the business.

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