Initial capital refers to any funds and other assets invested into the business by the owner at the beginning of the trading period.
Final capital refers to the business capital at the end of the trading period. Thus, final capital is initial capital when it has been influenced by factors such as additional investment, profits, drawings and losses.
The formula for determining initial capital is represented as follows:
Initial capital =final capital – addition investment – net profits +drawings
i.e : I .C = F.C – I – P + D