Which of the following is incorrect?

a. Capital is reduced by a loss

b. Profit does not affect capital

c. If there is no profit there is no capital

d. A loan received will reduce capital

d. A loan received will reduce capital

Explanation:

Capital is the collection of financial assets required to start and maintain a business. Capital is the money required to begin the operations of a business. The money is used to purchase assets and materials used in the production of goods or services. Capital is either borrowed (debt) or from the owner's savings (equity).

A loan is cash borrowed to boost the financial strength of an individual or a business. Should a business opt for a loan, it means it will have more cash to finance its operations. Its ability to produce goods and services is increased. Therefore, a loan is an addition to capital.