What is the classification of 'Capital' in accounting?

In accounting, 'Capital' is classified as Equity. This represents the ownership interest in a company, which encompasses the funds that the owners have invested into the business as well as any retained earnings that the business has accumulated over time. Equity reflects the net worth of the business and indicates what remains after all liabilities have been deducted from the total assets.

This classification is crucial because equity is vital for assessing the financial health of a business. It informs stakeholders, including investors and creditors, about the residual interest in the assets of the entity after deducting liabilities.

Understanding that 'Capital' is an element of Equity helps one recognize its role in overall financial structure and how it supports business operations and growth. Other choices, such as Current Liability, Non-Current Liability, and Asset, represent different elements of the financial framework, each serving distinct purposes within financial statements, but these do not capture the nature of Capital as ownership or stake in the business.