Explanation

The amount by which assets exceed liabilities is called capital (also known as owner’s equity, net worth, or shareholders’ equity). This represents the owner’s stake in the business.

This comes from the accounting equation: Assets = Liabilities + Capital. Rearranging this gives us: Capital = Assets – Liabilities. If a business has assets worth ₦100,000 and liabilities of ₦60,000, the capital is ₦40,000.

Capital includes the money the owner originally invested plus any profits retained in the business minus any drawings taken out. It represents what the owner would receive if the business sold all its assets and paid all its debts.

Bonus refers to extra shares issued to shareholders. Premium is an amount paid above face value. Provision is money set aside for expected expenses or losses. None of these describe the difference between assets and liabilities.