Future Business Leaders of America (FBLA) Accounting Practice Test

Which account is used to summarize the owner's equity in a business?

1. Capital

2. Revenue

3. Expenses

4. Withdrawals

The correct answer is: Capital

The account used to summarize the owner's equity in a business is the capital account. This account represents the owner's investment in the business and encompasses all contributions made by the owner, including any retained earnings or profits that have been reinvested back into the company. In accounting, the capital account tracks how much money the owner has invested in the business, as well as any further changes in equity due to profits, losses, and additional capital contributions. It provides a comprehensive view of the value that the owner has in the business over time. This contrasts with the other options. Revenue pertains to the income generated from business operations, while expenses relate to the costs incurred in generating that revenue. Withdrawals refer to the money taken out of the business by the owner, which reduces the capital account. Thus, capital is the most appropriate account to summarize the owner's overall equity in the business framework.