Accounting Fundamentals Certification (AFC) Practice Test 2026 – The Comprehensive All-in-One Guide to Exam Success!

To determine an owner's capital when preparing a balance sheet, the correct approach is to refer to the credit side of the owner's capital account. Owner's capital represents the net worth of the business that is contributed by the owners, reflecting their investment into the business.

On the balance sheet, the capital section is typically presented in a way that highlights contributions made by the owner(s) along with retained earnings. The credit side of the owner's capital account signifies these contributions and the accumulation of profits that have been retained in the business.

This credit side indicates the values that are added to the owner's equity, showcasing an increase in the capital as profits are generated or additional investments are made. Therefore, when preparing a balance sheet, using this information allows for an accurate representation of the total owner's equity.

The other options involve incorrect sources or sides for evaluating the owner's capital figures, leading to potential misrepresentation of the financial position regarding owner investments. By focusing on the balance sheet’s credit side of the owner's capital, one can ensure that the capital reported reflects the true financial interest of the owners in the company.