Why net profit transfer to liablity side ?
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Answer / nilesh girase
Because Profit of Organisation is working efforts of
Propritor/Partners/Co.as a income of consern persons. So
any firm liable to pay share of profit to above consern
persons. And Liability means a payment against
service/efforts provide to organtisation.
Net Profit = Sales - Purchase - Direct & Indirect Exp.of
Org.
| Is This Answer Correct ? | 7 Yes | 1 No |
Answer / sandep negi
A Simple thought is " Money earns money". The capital which
is used in business net profit is that interest. Captital
A/c always bears Liability side.While making final account,
net profit is transferred to Capital. thats why net profit
is transferd to liability side
| Is This Answer Correct ? | 3 Yes | 1 No |
Answer / sajan
A company is an artificial person created by law. The
company has to pay any profit in the given year either to
the partners(in the case of partnership firm) or to the
shareholders.Hence it is tranferred to liability side of
the balance.The investment in the company is made by some
person and any profit needs to be paid to that person so it
is payable amount hence a liability to the company. The
compny book needs to balance CR. and Dr. side.The profit
may be kept in reserve and surplus account for future
expenses.
Any doubts mail me --sajanji83@gmail.com
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / mohammed irfan khan
In simple Profit is the income earn by applying the
capital. so it is the liability of business to pay the
return on capital from whom the capital is acquired(share
holders)
| Is This Answer Correct ? | 0 Yes | 0 No |
Answer / arun kumar
we have to transfer net profit to liablity side because it
is an expenses to the business.
| Is This Answer Correct ? | 1 Yes | 6 No |
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