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why capital is a liability ?
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Answer / libin kulamuttom
it is an amount invested by the propraitor to start a busines.As per accounting entity concept the owner and the firm has seperate entity.so it shold be treated as a loan given by him.Hence in companies point of view,it has the liability to repay the amount in future.so capital is a liability.
| Is This Answer Correct ? | 93 Yes | 4 No |
Answer / supriya dasari
According to Companies Act, 1956:-
Company is a separate legal entity and it has its own assets
& liabilities in its nature.So Owner is different from the
company. Both are different personalities in the eyes of the
law.
So, from the above Act, The capital is borrowed from the
owner in to the company. So company is liable to repay that
capital and interest on capital based on agreement(if it is
partnership firm) or prospectus of the company.
| Is This Answer Correct ? | 29 Yes | 7 No |
Answer / binoy
Capital is a contibution by the shareholders. So the
company owes the shareholders. Hence, it is shown as an
liability
| Is This Answer Correct ? | 12 Yes | 8 No |
Answer / adish jain
becoz a man brings his money to start a business. this money
treated as a loan that why it is shown in liability side in
accounting.
cash a/c dr. to capital a/c cr.
| Is This Answer Correct ? | 10 Yes | 7 No |
Answer / sahil yadav
Capital refers to amount invested by the proprietor in the business.It may be in the form of cash or Asset having amoneta value.It is a liability of business entity to its owner.It is a liability of business eno its owner.It is also termed as Internalliability,Owner'sequity,proprietor'fund,Networth.
It increase with further investment made in the business and the amount of profit earned.It decrease when it is withdrawn(drawings) or loss in the business.
Capital=TotalAsset-ExternalLiability.
| Is This Answer Correct ? | 3 Yes | 3 No |
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