In accounting terms, what is 'capital' primarily referred to as?

In accounting, 'capital' primarily refers to the initial investment or equity in a business. This encompasses the funds that owners contribute to the business, which can be in the form of cash, property, or other assets that increase the company's equity base. Capital represents the financial backing that supports the operations of the business and contributes to its ability to generate income.

Understanding capital is crucial because it reflects the financial health and sustainability of a business. It indicates how much of the business is funded by the owners' investment as opposed to borrowed funds. In contrast, income generated by the business or the financial resources available to shareholders do not accurately capture the essence of capital in accounting terms. Likewise, the value of all liabilities combined does not pertain to capital, as liabilities represent the debts and obligations of the business rather than the owners’ equity.