Is capital a real account?
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No, capital account is not a real account.
Capital account represents the amount of money invested by the owner/owners of the business along with the retained earnings net of drawings or dividends. Capital account has a natural credit balance because it is an internal liability of the business.
Capital account is a personal account because, as discussed above, it represents the investment of the owner or owners. Personal account represents person or persons.
Whereas a real account represents the material assets of a business. Example:- Cash A/c, Fixed assets A/c etc. That’s why the capital account is not a real account.
Being a personal account, the following golden rule of accounting applies to capital account:-
“Debit the receiver and credit the giver”
Here, as the owner gives an amount as an investment into the business (owner and the business are separate entities), the capital account has a credit balance.