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why we are considering the net profit as liable in balance
sheet
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Answer Posted / k. phalguna rao
Ex: A starded business with the name of ABC company with
investment of Rs. 1,00,000/-
so here A is owne of the company
what ever his investment to the ABC company is called
capital (liable to the company)
Note: Profit is return of Investment of the Owner for his
investment as a capital of Rs. 1,00,000/- in the business
so that profit belongs to the owner of the co not to the
ABC co., in the year end
hence profit will be shown in liabilities which will be
added to the capital
for next f/y capital will as follows
100000 + this year profit(Ex. 10% 10000) = 1,10,000.00
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