Capital

Capital can be defined in several different ways.  In the legal arena, capital refers to the portion of owner's equity that is required by statute to be retained by the company to protect creditors.  This is the value of all capital stock issued. In the finance world, capital refers to the total assets of a company.

Accountants define capital as owner's equity, and recognize both portions of owner's equity:

• Paid in Capital - the amount advanced by stockholders to run the business.
• Earned Capital - the amount of capital retained by the company, and produced by profitable operations.