Capital

Capital is the monetary valuation of a company’s fixed assets. In other words, it is the part of a company’s assets that has been involved in the production process for a long time and gradually transfers its value to the cost of finished products.

Types of Capital

In accounting, capital may include:

• Construction in progress.
• Long-term financial investments.
• Intangible assets such as copyrights, licenses, patents.
• The most basic part is fixed assets, including buildings and structures, equipment, machinery, biological assets (e.g. perennial plants), and tools.

According to their role in the production process, productive and non-productive capital are distinguished:

• Productive capital includes fixed assets involved in production.
• Non-productive capital refers to assets that support the production process (e.g. administrative buildings).

Capital can also be owned by the company, leased, or managed operationally. This division is called the classification of capital by ownership.

Indicators used to assess the effectiveness of fixed assets:

• Depreciation reserve ratio.
• Renewal coefficient.
• Work center efficiency, etc.

Interesting Facts About the Use of the Term

Perhaps the most famous definition of the term capital belongs to Karl Marx, the author of the work “Capital.” He defined capital as a self-increasing value that creates surplus value.