A ‘Capital Account’ is a term used in partnership and in limited liability company business formats. It refers to the individual balances in the equity section of the balance sheet. The basic formula for value is beginning balance plus contributed capital plus earnings from the current accounting period less any withdrawals
Profits from a business are allocated (assigned) based on business performance factors related to the respected partner or member. Examples include bonuses, marginal increase in business value, and/or hours of labor.