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jbk2000
Aug 14, 2010, 06:09 AM
Now to find out the net asset/(liability) I have seen that you have to add up all the assets - all liabilities. Is the net asset/(liability) the same as capital?

I am really confused right now as another way I have learnt is that u have fixed assets + (current assets - current liabilities) - long term liabilities = capital. This gives me the same answer as the equation above it, can someone clear this up for me thanks.

jbk2000
Aug 14, 2010, 06:14 AM
Ok sorry I understand now lol. Now I just want to know whether capital is the same as equity?

morgaine300
Aug 14, 2010, 11:13 PM
Depends on the use of the word capital and who you ask.

In accounting it can mean the same thing, as long as it's year-end and net income and drawings have been closed out. That is, the basic accounting equation is:
assets = liabilities + equity
For a sole proprietorship, everything comes down to a "capital" account, but for a corporation it wouldn't be called that as you'd have both stock and retained earnings and maybe treasury stock as well.

In finance, capital more means long-term debt and equity. (i.e. financing)

But the way you're using it, seems more like capital and equity could be used interchangibly.

However, I have some issues there. In your first set of equations (with the net assets/liabilities), the liabilities aren't negative. And "net assets" is the same as equity. And I don't like that second equation you used (which essentially is saying fixed assets plus working capital minus long-term debt - not sure where that's coming from), it's not technically right cause there's more assets than just fixed and current. There's also investments and intangibles.