The amount invested by the proprietor to start the business is called:
Show answer Hide answer
Answer: A. Capital
Explanation
The initial funds or assets contributed by the proprietor to launch the business constitute capital. Capital represents the owner net investment into the newly established enterprise. Starting investments provided by business founders are universally recorded as capital. Capital serves as the foundational financial bedrock required to purchase initial business assets. It represents the residual interest in the assets of the entity after deducting liabilities. Owner capital increases with profitable operations and decreases through net losses.
Entrepreneurs must determine their initial capital requirements before launching a venture. Adequate capitalization prevents early cash flow shortages and promotes business survival. Lenders evaluate existing owner capital when deciding whether to extend commercial loans. Business refers to the commercial organization rather than the specific financial funding. Drawings denote the extraction of funds by owners for personal use rather than investment. Choosing all options is incorrect because only capital represents startup funding.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. Sales returns are alternatively called____________?
Show answer Hide answer
Answer: C. Return inward
Sales returns occur when customers send previously purchased merchandise back to the business due to dissatisfaction or errors. In accounting nomenclature, these returned goods flow inward into the company's possession f...
Q2. The financial debts and obligations of a business are called___________?
Show answer Hide answer
Answer: A. Liabilities
Financial obligations and debts owed by any enterprise to external entities are liabilities. Liabilities represent claims against company assets by outside creditors and lenders. Obligations requiring future economic sac...
Q3. When a business owner extracts funds for personal use, it is designated as ___________?
Show answer Hide answer
Answer: D. Drawing
When business owners extract company funds for personal use the amount is a drawing. Drawings directly reduce the owner equity section of the balance sheet statement. Personal withdrawals of cash or assets from the busin...
Q4. The procedure of logging entries across various journals is called_________?
Show answer Hide answer
Answer: D. Journalizing
Journalizing is the formal bookkeeping procedure of recording chronological business transactions into journals. Every transaction is translated into specific debit and credit entries accompanied by a brief descriptive n...
Q5. Unsold merchandise constitutes ______________?
Show answer Hide answer
Answer: C. Inventory
Goods and merchandise that remain unsold at the end of an accounting period constitute inventory. Inventory consists of physical items held for resale in the ordinary course of business. Unsold stock awaiting customer pu...
Q6. The purchase journal is maintained to log_____________?
Show answer Hide answer
Answer: B. All credit purchases of goods
The purchase journal is a specialized book dedicated exclusively to recording credit purchases of goods. Transactions involving the acquisition of merchandise on credit are logged in this journal. Cash purchases and non-...