In Economic, What Is Capital and Real Capital

December 1st, 2009 Comments off
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Capital

  • One of the factors of production

  • Defined as “ wealth which is use for the production of further wealth; or simply a commodity which is used in the production or other goods and services like plant or equipment

  • Represents current consumption forgone in order to obtain future production and future consumption

  • It enhances the productivity of labor and land

Real Capital

  • Capital is called “ real “ when it is having machines factories, railways, stocks of raw materials and others

  • Real capital can be further subdivided into

    • Fixed Capital-includes factories, warehouses, offices, shops and other building used in industry and trade; plant and machinery and equipment; means of transport and communication

    • Floating or circulating capital-includes raw materials, fuel, goods in process of manufacture, stocks held by producers or traders.[ Alfred Marshall describe circulating capital as “ fulfilling the whole of its office in the production in which t is engaged by a single use”

    • Specific capital-includes equipment which cannot normally be used for any other purpose than that for which it was originally designed and constructed

    • Non-specific capital-includes equipment which can be used in a variety of processes.

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Financial Accounting

 
 

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