The normal balance in a capital account is a credit. Capital is a balance sheet account. Assets = Liabilities + Capital
[Debit] Interest on capital account xxxx [credit] Capital account xxxx
Real Account
Current account shows current year current year transactions and capital account shows both current transactions relating to businessman and initial capital of businessman.According to FEMA Act 2000, "There is no restrictions on holding or exchanging of foreign currency under Current Account . But Any foreign currency is under capital account , then it must be controlled under the regulations of RBI."In partnership , partners can make current account separately from capital account in which they can show only their salary, interest on capital and interest on drawing etc. and in capital account, they can show only their capital invested in the business of partnership.USA has divided export and import transactions into 2 accounts: One is the current account and other is the capital account. The current account includes in international trade in goods and services and with earnings on investments. The capital account includes of capital transfers and the acquisition and disposal of non-produced, non-financial assets.In general Current account is used for receipt and payment cash and non capital items and capital account is used for sources and utilization of capital.
Drawings account is contra account for reducing the owners capital account and as capital account is credit so contra account should be debit so that it can use to reduce the balance from owner’s capital.
The normal balance in a capital account is a credit. Capital is a balance sheet account. Assets = Liabilities + Capital
Capital account as well as Drawings account are Personal accounts !!!
[Debit] Interest on capital account xxxx [credit] Capital account xxxx
Real Account
Personal account
Withdrawal are charged to drawing account and drawing account is contra account of capital account so withdrawal are deducted from capital account.
Current account shows current year current year transactions and capital account shows both current transactions relating to businessman and initial capital of businessman.According to FEMA Act 2000, "There is no restrictions on holding or exchanging of foreign currency under Current Account . But Any foreign currency is under capital account , then it must be controlled under the regulations of RBI."In partnership , partners can make current account separately from capital account in which they can show only their salary, interest on capital and interest on drawing etc. and in capital account, they can show only their capital invested in the business of partnership.USA has divided export and import transactions into 2 accounts: One is the current account and other is the capital account. The current account includes in international trade in goods and services and with earnings on investments. The capital account includes of capital transfers and the acquisition and disposal of non-produced, non-financial assets.In general Current account is used for receipt and payment cash and non capital items and capital account is used for sources and utilization of capital.
Capital account increases when capital is introduced, shares are issued, increase in retained profits, etc.
Drawings account is contra account for reducing the owners capital account and as capital account is credit so contra account should be debit so that it can use to reduce the balance from owner’s capital.
The balance of payments, then, is the sum of the balance on current account and the balance on capital and financial account. It is important to understand that the deficit indicated by the current account is financed through activities recorded on the capital and financial account. The deficit on the current account must be exactly offset by the surplus on the capital and financial account (if it is not, net errors and omissions will correct it). This means then that the sum of the current account and the capital and financial account is equal to zero.
Additional capital is shown under capital account of balance sheet and not shown in profit and loss appropriation account.
Capital account is liability nature of account because any capital introduce by owner towards business is the liability of business to return to it's owner.