Since ancient times, scientists have been arguing about what capital is. At the moment, there is no single definition that would suit everyone. Some are of the opinion that capital is a stock of goods and services or wealth. Others, answering the question of what capital is, argue that this is a set of means of production that are actively used in the manufacturing process.
In any case, it implies the availability of resources by which the entrepreneur receives income. Often people consider capital from a monetary position, that is, it is the amount of money that ensures the acquisition of all the necessary equipment to start production activities. It is important to understand that only the resource that brings profit to the owner can be considered capital. For example, you have a good sewing machine - this is stock, resource, value, but not capital. It will become one only after the machine passes into the hands of a professional sewing workshop, that is, after being introduced into production activities.
In addition, each entrepreneur should understand what capital is in accounting. It is expressed in cost equivalent, it can be calculated as the difference in the sum of assets and liabilities of the balance sheet. The capital of any enterprise or organization can be divided into two main groups:
- main;
- negotiable.
The first group includes resources that have been involved in the production process for more than a year, gradually transferring their value to the cost of goods, which is subsequently included in its price in the market. Fixed capital does not change its material form, but is indicated in the “fixed assets” column in the financial statements. Examples of such resources include structures, vehicles, equipment, various buildings, and even equipment. Working capital is understood as the group of means of production that participates in the process of manufacturing a new product within one cycle, usually less than a year, while changing its material form. The cost of these resources is fully included in the price of finished products. The working capital is semi-finished products, raw materials, cash and more.
Answering the question of what capital is, it is understood that these are funds owned by the entrepreneur. But this will not always be true, since capital can be divided into its own and borrowed. Own, in turn, is conditionally divided into:
The first type is also called charter, as it is formed at the time of the formation of the company as a legal entity. And the term “folding” is explained by the fact that it can consist of individual contributions of participants. For example, the authorized capital of a bank, which is a joint-stock company, consists of separate shares of shareholders who receive shares in return for the invested funds. Subsequently, they bring investors a stable income in the form of dividends.
According to the current legislation, each enterprise in the process of its activity is obliged to create a reserve fund. It collects funds intended to cover possible losses in the event of adverse situations. The reserve capital gives confidence to the head of the company that the production will continue to work efficiently even in the event of unforeseen losses. This fund serves as a guarantee; therefore, its formation is considered an important part of the process of organizing a company.
Recently, a concept such as entrepreneurial capital has been used. It includes all the means and resources at the disposal of the businessman and intended to ensure the stable functioning of the company. Entrepreneurial capital at the same time satisfies the needs and desires of investors, organization personnel, managers, and even the state.