What is means by principal amount and capital amounts?
Answers
hey!
_____
Principal amount on a loan is the amount borrowed. To better understand let's look at the story of John. When John bought his first car he didn't have enough money to pay for it in cash so he had to take out a loan. He borrowed $7,500.
According to the terms of the loan John had to pay it off in five years with an interest rate of 10%. The initial amount that he borrowed or the $7,500 is called the principal amount of the loan.
________________________
Capital Amount means any amount in money or money's worth whichapart from the principal sections does not fall to be included in any computation of income for purposes of the Tax Acts and other expressions including the word capital.
hope help u
Explanation:
In the context of borrowing, principalrefers to the initial size of a loan; it can also mean the amount still owed on a loan. If you take out a $50,000 mortgage, for example, the principal is $50,000. ... Paying down the principalof a loan is the only way to reduce theamount of interest that accrues each month