Question

what does a credit balance in a capital account signify? ​

Answer 1

Answer:

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Answer 2

Credit balance in your Capital A/c signifies that your business owes you money(also known as capital).

Explanation:

In order to understand the answer,lets first understand the status of your business,i.e whether it is a company/partnership/sole proprietorship.

Assuming that the status of your business is that of a company,the concept of Separate legal identity will come into play i.e In the eyes of the law,the company is considered as a separate identity or a person and it will have a "corporate veil".

Now,since you have introduced capital(money) into the business and if your Capital account has credit balance,it means that your company owes you money(similar to a debt/loan).

If we look at the other scenario,i.e if the capital account had debit balance,then you owe your company money.