Question { Capital IQ, 89045 }

difference between Equity Capital and Preference capital?

Answer

Equity shareholder r the real owner of the company.They get
dividend after paying dividend to preference shareholder
and other obligation.They take part in company general
meeting and play a advisory role.

preference sharehoder r creditor to the company. company
have to pay fixed divedend to them but it depend on the
natute of the preference shareholde like what type of
shareholder he/she is ex.
convertable
non-convertable
commulitive
non-commulitile etc.
on the basis of this natue preference sareholder get right
form the company.

Question { Hewitt, 9694 }

If net profit is a profit why does it appear on the
liability side of the balance sheet

Answer

It's appear on the liability side because it's the result
of capital investment of a company and capital is a
libiality for business (because of business entity
concept). whatever capital invested by owner he want some
return form it, thatwhy net profit become liability for
business, it is so because business have to pay this(net
profit) to the owner.