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.

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.

Answer / binoy

Capital is a contibution by the shareholders. So the
company owes the shareholders. Hence, it is shown as an
liability

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.

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It increase with further investment made in the business and the amount of profit earned.It decrease when it is withdrawn(drawings) or loss in the business.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.

what is private equity?

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Case Study: Deepak Hand tools Private Limited DHPL is a small sized firm manufacturing hand tools. It manufacturing plan is situated in Haryana. The company’s sales in the year ending on 31st March 2007 were Rs.1000 million (Rs.100 crore) on an asset base of Rs.650 million. The net profit of the company was Rs.76 million. The management of the company wants to improve profitability further. The required rate of return of the company is 14 percent. The company is currently considering an investment proposal. One is to expand its manufacturing capacity. The estimated cost of the new equipment is Rs.250 million. It is expected to have an economic life of 10 years. The accountant forecasts that net cash inflows would be Rs.45 million per annum for the first three years, Rs.68 million per annum from year four to year eight and for the remaining two years Rs.30million per annum. The plant can be sold for Rs.55 million at the end of its economic life. The company would need to raise debt to the extent of Rs.200 million. The company has the following options of borrowing Rs.200 million: a. The company can borrow funds from a nationalized bank at the interest rate of 14 percent for 10 years. It will be required to pay equal annual installment of interest and repayment of principal. b. A financial institution has offered to lend money to DHPL at 13.5 per annum but it needs to pay equated quarterly installment of interest and repayment of principal. Questions: 1. Should the company expand its capacity? Show the computation of NPV 2. What is the annual installment of bank loan? 3. Calculate the quarterly installments of the Financial Institution loan 4. Should the company borrow from the bank or from the financial institution?

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