What is the simple meaning of actual capital?

Correct answer: Amount left after deducting outside liabilities from assets

The direct answer is option A: actual capital is the amount left after deducting outside liabilities from assets. In simple terms, it is the firm’s net worth. First identify all assets, such as cash, stock, furniture and debtors. Then identify outside liabilities, such as creditors and bank loans owed to outsiders. Subtract the second total from the first: actual capital = total assets − outside liabilities. Option A gives this correct meaning. Option B, cash minus drawings, is not the firm’s total net capital because it ignores other assets and liabilities. Option C, sales minus expenses, gives profit, not capital. Option D, loan minus interest, is not a measure of the firm’s net assets. Do not confuse actual capital with profit or cash balance. The exam cue is: assets less external liabilities equals net assets, also called actual capital.