Business, Legal & Accounting Glossary

Definition: Principal


What is the dictionary definition of Principal?

Dictionary Definition

  1. When creating a power of attorney or other legal document, the person who appoints an attorney-in-fact or agent to act on his or her behalf.
  2. In criminal law, the main perpetrator of a crime.
  3. In commercial law, the total amount of a loan, not including any capitalized fees or interest.
  4. In the law of trusts, the property of the trust, as opposed to the income generated by that property. The principal is also known as the trust corpus; that’s Latin for “body.” For example, Arthur establishes a new trust with $100,000, with interest and other income payable to Merlin; the $100,000 is the trust principal or corpus.

Full Definition of Principal

Principal is the amount of money you originally invest. Or, for something like a loan (e.g. a mortgage), it is the amount you still owe to the issuer of the loan (e.g. the bank).

If you’ve got principal, you can make money. Principal earns interest for its owner. For a savings account, the owner is the investor, and the bank pays interest to the investor. For a loan, the owner is the bank (or other entity), and the borrower pays interest.

In the case of a savings account, the principal grows as interest payments are added. In the case of a loan, the principal decreases until it reaches zero, at which point the loan is paid off.

Related Phrases

Interest spread
Compound interest

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Principal. Payroll & Accounting Heaven Ltd. November 30, 2021
Chicago Manual of Style (CMS):
Principal. Payroll & Accounting Heaven Ltd. (accessed: November 30, 2021).
American Psychological Association (APA):
Principal. Retrieved November 30, 2021, from website:

Definition Sources

Definitions for Principal are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 29th November, 2021 | 3 Views.