Glossary · Also called Additional capital
Capital introduced
New money or assets the owner puts into the business during the year.
What it means
Resources contributed by the owner to the business after the start of the period, increasing capital.
Example
An owner paying RM10,000 of personal savings into the business increases capital by RM10,000.
Why it matters
It must be separated from profit when explaining a change in capital over the year.
In practice
Capital introduced is credited to the owner's capital account. It increases the capital section of the statement of financial position, because it is extra resources the owner has put into the firm during the year. It may be cash paid into the business bank account, or a private asset moved in, such as the owner's own computer valued at RM2,500.
It matters in incomplete records questions. Closing capital rose by RM12,000. The owner had introduced RM5,000 and drawn RM3,000. True profit is RM12,000 minus RM5,000 plus RM3,000, which is RM10,000. Ignoring capital introduced would overstate profit.
Take care to tell it apart from revenue. Capital introduced is the owner funding the business, and it never appears in the income statement. Revenue is earned from customers and is the first line of that statement. One increases the owner's stake in the business. The other measures how the business has traded.
If capital, drawings and profit are hard to link, one of our teachers can work through the capital reconciliation with you. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 5.6 Incomplete records (page 17).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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