Why profit is a liability and loss is an assets




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Why profit is a liability and loss is an assets..

Answer / babulu180605

Profit is a liability as the profit needs to be distributed
among the members or partners of the company or firm. In
case of loss it is assumed that it is the amount to be
recoverd back in to the concern.Therefore profit is
liability and loss is an asset to the concern.

Is This Answer Correct ?    335 Yes 38 No

Why profit is a liability and loss is an assets..

Answer / 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.

Is This Answer Correct ?    225 Yes 11 No

Why profit is a liability and loss is an assets..

Answer / k.kutty

A counter question is there. Why Share capital is a
liability? Profit is supposed to go the proprietor who
invest the money. So the place of a profit is there where
share capital is. Loss is not actually an asset like land,
furniture, stock or other intangible assets. Due to the
mechanisam of the Balance sheet and a loss always has a
debit balance it appears in the part of Asset side.

Is This Answer Correct ?    42 Yes 9 No




Why profit is a liability and loss is an assets..

Answer / sheny.k.v.

as per business entity concept the business has a separate
entity apart from its partner.from business's point of
view,profit is a liability, bcoz it is liable to its
patner's tiil the profit is divide & distribute to all of
them.the items which decrease the liability are the assets
as far as i am concerned,the loss itself reduce or dispel
the profit from the liability side.in that sense also loss
is a asset.

Is This Answer Correct ?    9 Yes 3 No

Why profit is a liability and loss is an assets..

Answer / prasad shirke

profit is a indirect income of a capital. when we start
business,we invest our capitl for earning profit,hence at
the end of the year we add profit in capital account.

Liabilities means dues, profit is the dues of the Capital.
if Capital received Profit he invest part of this profit in
business for increse his business,hence Profit is a
liability.

Loss is oposit of Profit,we also deducted loss from
Capital.but as per presentation point of view we take a
Loss on Assets side (thhi is my point of view)

Is This Answer Correct ?    8 Yes 3 No

Why profit is a liability and loss is an assets..

Answer / ankur

THE ITEM'S SHOWN IN THE LIABILITY SIDE IS THE LIABILITY OF
THE BUSINESS BECAUSE THESE AMOUNTS SIGNIFISE THE AMT. TO BE
PAID AND THE ITEMS SHOWN IN THE DEBIT SIDE IS THE RIGHT OF
THE PERSON FROM WHICH THEY CAN RECOVER THEIR AMOUNT.

BECAUSE OF THE ABOVE EXPLANATION IT CAN BE UNDERSTOOD THAT
PROFIT IS THE AMOUNT WHICH THE BUSINESMAN HAS NOT TAKEN OUT
AND THEREFORE IT A LIABILITY TO A BUSINESS AS LIKE CAPITAL
AND
LOSSES IS THE RESULT OF MISUSING THE FUNDS OF BUSINESS MAN
AND SHOWS THE RESULT OF THE RISK TAKEN BY BUSINESS MAN AND
ALSO SIGNIFIES THE AMOUNT OF RIGHT ON THIS LOSS.
THEREFORE LOSS IS SHOWN IN THE ASSET SIDE.

HENCE ASSET SIDE THE RIGHT OF THE OWNER IN THE
PROPORTIONATE AMOUNT INVESTED.

Is This Answer Correct ?    9 Yes 6 No

Why profit is a liability and loss is an assets..

Answer / jagdish sherla

The profit is liability because when the company close the
business the profit will be distributed in the ratio of
shares profit. And Loss is an asset because when the
company close the business all the assets are sold and
clear the dues of sundry creditors.

Is This Answer Correct ?    32 Yes 30 No

Why profit is a liability and loss is an assets..

Answer / chandra kanth

profit is liability and loss is asset.Why means profis
should be distributed to share holedrs(as per business
entity concept business is differen from share
holders).when company needs to distribute or pay to
outsiders or shareholders that should be treated as
liability.Where as loss is an asset because loss will arise
when expenses are more than incomes.Here company incurrred
expenses that may give incomes in futture year also.so like
prepaid or deferred expenses loss also should be treated as
asset.

Is This Answer Correct ?    4 Yes 2 No

Why profit is a liability and loss is an assets..

Answer / jagadish

profit is an income to the company it has to distribute to
the shareholder becoz they are the owners of the company so
it is treated as a liabilty and is shown in the liabilty
side of the balance sheet, whereas loss is an asset becoz it
has to recover by the company so it is treated as an asset.

Is This Answer Correct ?    4 Yes 2 No

Why profit is a liability and loss is an assets..

Answer / sunil kumar pattuvakkaran

According to Separate entity concept Owner & the business
are not one& the same. The company is entirely different
from its owners.
When Business making profit ,its should be liable to give that profit to Partners.Hence its a liability in the view of Business Firm.When business making loss, its partners is liable to give that amount to business.I.E business wants to that much amount recovered from partners.So Loss is asset , in the view of business firm.

Is This Answer Correct ?    1 Yes 1 No

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