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why net profit add in capital in balance sheet
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Answer / madan
We have to add net profits to his capital in balance sheet
because it is proprietor's capital from that capital we have
have earned profits. And profits are liability to the
business. Profits increases the proprietor's capital. The
proprietor had invested capital to earn profits. So, for all
the above reasons we have to add profits and deduct all
losses of the business.
| Is This Answer Correct ? | 34 Yes | 8 No |
Answer / v.l.kundana
We shoud add net profit to capital because according to bussiness entity concept entetprise is a seperate entity apart from its owner . So when the owner starts the bussiness by investing capital say 6,00,000 then the bussiness owes to pay the invested capital to the owner in other words the enterprise is liable to to the ownerfor the capital invested. So when the firms earns profit it is a liability because it the ousider's money(owner) frm which the enterprise earned. So when anything which does not belong to the enterprise it is a liability. So we should add net profit to capital
| Is This Answer Correct ? | 19 Yes | 1 No |
Answer / anandgurrala
Net Profit should be added to the capital because it is the
property of the Share holders or the owners or the company
as it was generated from the funds generated from them. and
in the other hand it is treated as liability (to bo shown
in liabilities side) because it should be distributed to
the share holders(Dividend) or the the owners of the
company.
| Is This Answer Correct ? | 8 Yes | 4 No |
Answer / sumit dey
as per accounting concepts and conventions there is a concept in accounting called BUSINESS ENTITY CONCEPT which says business is separate from proprietor so when the proprietor contributes money to business it means business is borrowing money from outsider so it is liability to business so when the capital is liability even the profit earned is liability and repayable to the owner so is treated as liability as per accounting
| Is This Answer Correct ? | 4 Yes | 0 No |
Answer / ranjith moovari
Net Profit is the figure derived after dividend payable. So the NP is added to capital as it is reinvested to the business.
| Is This Answer Correct ? | 1 Yes | 0 No |
Answer / m.faruq.abbasi
We kn0w that in acc0unting we will treate expensces nd l0sses debit and gain,ic0me as credit s0 we treate pr0fit as credit and add it in capital because its increases capital
| Is This Answer Correct ? | 1 Yes | 1 No |
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