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why profit is a liability and loss is an asset?
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Answer / guest
Because profit is an addition to the capital of the
entityand capital is aliability of any business having a
legal separate entity. Loss reduces the capital, hence the
liability decreases .
| Is This Answer Correct ? | 10 Yes | 2 No |
Answer / roshan
profit is a liability to company bzs it should be
distrebuted to share holders
but not in case of loss means reducing in the capital
| Is This Answer Correct ? | 7 Yes | 2 No |
Answer / anudeep
hi
we know the first concept of accounting is entity concept
as per that concept owner is distinct from business
thats why in sole proprietaryship profit is added to capital
and loss is deducted from capital
like in companies and partnership also
loss can be deducted from capital or shown as asset in asset
side of the balance sheet
in case of companies loss can be duducted from reserves or
shown as asset
| Is This Answer Correct ? | 5 Yes | 2 No |
Answer / javid
i ill go to Roshan, profit is liability to the company b'coz
its should disturbuted to share holder
| Is This Answer Correct ? | 4 Yes | 1 No |
Answer / h.r. sreepada bhagi
Carried Forward profit is shown on the Liability side of the
Balance Sheet. Under Business Entity Concept of Accounting,
the shareholders, promoters or partners who have contributed
capital to the business unit are distinct from the business
unit itself and hence the balance of profit earned over the
years is due to them from the business unit.
Carried Forward loss is shown on the liabilities side of the
Balance Sheet & going by the above concept it's receivable
from the contributors of capital or is offset against their
capital. It's not a real asset.
B/fd loss can be distributed to the shareholders or partners
& B/fd loss can be offset against future profits.
| Is This Answer Correct ? | 4 Yes | 2 No |
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