Why profit is a liability and loss is an assets
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Answer Posted / sridharan.v
Profits Are Liability. Losses are Asset.
According to Separate entity concept Owner & the business
are not one& the same. The company is entirely different
from its owners.
Asset= what we own
Liability= what we owe
i. profit is a liabilty because business runs with owners/
share holders capilal. so the profit is to be reimbus to
the owner of the business. Therefore it is a liablity to
the business. i.e we owe(liable) to the owners
ii. In the same way in case of loss owners has to
compensate to the business. Therefore it is an asset to the
business.i.e We owns (Asset) to be compensated by the
owners.
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