Q.Define the following terms:

These four terms describe the owner's stake in the business and the persons who owe money to, or are owed money by, the business.

(i) Capital is the amount invested by the owner in the business, representing the owner's claim on its assets. (ii) Drawings is cash or goods withdrawn by the owner from the business for personal use, which reduces capital. (iii) A Debtor is a person or entity who owes money to the business, usually from a credit sale of goods. (iv) A Creditor is a person o …

1. Capital — the amount invested by the owner in the business, either in the form of cash or in kind (assets brought in). It represents the owner's own claim on the assets of the business, and appears on the liabilities side of the Balance Sheet (since the business, as a separate accounting entity, technically "owes" this amount back to its owner).
2. Drawings — cash or goods withdrawn by the owner from the business for personal use, unrelated to the business's own operations. Drawings reduce the owner's capital, and are deducted from Capital in the Balance Sheet.
3. Debtor — a person or entity who owes money to the business, most commonly because the business sold goods or services to them on credit and payment is still outstanding. Debtors appear as a current asset in the Balance Sheet. …

Students frequently confuse Debtor and Creditor — remember a DEBTOR is someone who OWES the business (an asset, money coming IN), while a CREDIT …