Definition
Capital Account
The running ledger of what each LP contributed, was allocated in profit or loss, and has been paid out.
A capital account is the per-LP ledger that tracks economic position in an SPV: capital contributed, share of profit and loss allocated each year, fees charged, and distributions received. It is the number that determines what an LP is owed on a distribution or a wind-up, and it is the figure that flows onto the Schedule K-1 each year. Capital accounts are maintained by the fund administrator and can be kept on a tax basis, a GAAP basis, or both, so an LP's capital account balance and the current market value of their position are usually different numbers. Errors compound: a mis-stated capital account in year one produces wrong K-1s and wrong distributions for the life of the vehicle.