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In a partnership, what does the term 'capital account' refer to?

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Question: In a partnership, what does the term \'capital account\' refer to?

Options:

  1. The total amount of money invested by the partners
  2. The account used for daily business transactions
  3. The account that tracks profits and losses
  4. The account that records partner withdrawals

Correct Answer: The total amount of money invested by the partners

Solution: 

The capital account refers to the total amount of money invested by the partners in the partnership.

In a partnership, what does the term 'capital account' refer to?

Practice Questions

Q1
In a partnership, what does the term 'capital account' refer to?
  1. The total amount of money invested by the partners
  2. The account used for daily business transactions
  3. The account that tracks profits and losses
  4. The account that records partner withdrawals

Questions & Step-by-Step Solutions

In a partnership, what does the term 'capital account' refer to?
  • Step 1: Understand that a partnership is a business owned by two or more people.
  • Step 2: Know that each partner can invest money into the business.
  • Step 3: The 'capital account' is a record of how much money each partner has invested.
  • Step 4: The capital account shows the total amount of money that all partners have put into the partnership.
  • Capital Account – The capital account in a partnership represents the total amount of money and assets that each partner has invested in the business.
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