Fund accounting

Partners' capital

Also called partners' equity, net assets, members' capital.

Definition

Partners' capital is the equity of a limited partnership fund, the sum of every limited and general partner's capital account, equal to total assets less liabilities. The audited financial statements reconcile it from opening to closing balance through contributions, distributions and allocated income, gains and losses.

Updated October 9, 2026Checked against our editorial standards

Example

A fund opens the year with partners' capital of $60M. During the year it receives $10M of contributions, pays $8M of distributions, charges $1.5M of management fee and expenses, realises a $4M gain and records $6M of unrealised gain. Closing partners' capital is $60M plus $10M less $8M less $1.5M plus $4M plus $6M, or $70.5M. Of that, the GP's capital account holds its 1% commitment share of roughly $700,000 plus $1.5M of accrued carry allocated from the LPs, and the LPs hold the remaining $68.3M.

Confused with

NAV. The same total. NAV is the term used in LP reporting and performance multiples; partners' capital is the caption on the balance sheet and the statement of changes.

Capital account. One partner's slice of partners' capital. The audit ties every capital account back to the total, which is why an unreconciled account is a fund-level problem.

In practice

The statement of changes in partners' capital is the heart of a fund's audited financial statements, and the LP's quarterly capital account statement is the same reconciliation for one partner. Allocations of income, gains and losses between partners must follow the LPA, including any side letter terms, and the auditor checks that the allocation method is the one the documents describe.

Related terms

Capital accountA capital account is the running balance of a single partner's economic interest in a fund: contributions in, allocations of income, gains and losses, less distributions out.
NAV (net asset value)NAV, net asset value, is the value of a fund's assets, with investments carried at fair value, less its liabilities at a reporting date, and equals the total of all partners' capital accounts.
Accrued carried interestAccrued carried interest is the amount of carry the general partner would be entitled to if the fund sold every investment at its current fair value and ran the proceeds through the distribution waterfall, recorded as an allocation from limited partners' capital accounts to the general partner's capital account rather than as a payment, and reversed if values fall.
Expense allocationExpense allocation is the determination of who bears each cost: the fund and its limited partners, the management company out of its fee, or several funds and co-investment vehicles sharing a cost pro rata, according to the expense provisions of the limited partnership agreement and the manager's written allocation policy.