Is Equity and Capital the Same?

by Sindhu
(Klang, Selangor, Malaysia)

Q: Are equity and capital the same ?

No, they are not.

Equity is the owner's share of the assets of a business (assets can be owned by the owner or owed to external parties - debts).

Capital is the owner's investment of assets in a business.

The owner can also make profits from a business that he/she runs. These profits belong to the owner (they do not belong to anyone else, right?). Therefore, profits from a business are also part of equity.

Profits are kept in accounts called reserves.

Therefore equity consists of capital plus reserves (accumulated profits).

Capital is one sub-category of equity, reserves (accumulated profits) are another.

Comments for Is Equity and Capital the Same?

Click here to add your own comments

by: Sajed khan

Good job sir. Really good info, thanks.

by: Anonymous

I understood although it was somehow difficult to classify their real meaning.

Good answer
by: Anonymous

Simple and clear - well written!


by: Anonymous

Thanks! Your answer was really helpful.

by: mustafa

yaah this is great information that i needed.

thank you very much for your kind and honest information . wish you proceed like this.

Click here to add your own comments

Return to Ask a Question About This Lesson!.

Enjoying this Website?
Help Support it with a Donation


Advertise on

All the lessons on this site and much, much more...

Accounting Basics: Complete Guide

Available Now On

Get Your Degree!

Find schools and get information on the program that’s right for you.

Powered by

Subscribe to
The Student Accountant newsletter

Enter Your E-mail Address
Enter Your First Name (optional)

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you The Student Accountant.