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why net profit add in capital in balance sheet

Answer Posted / sumit dey

as per accounting concepts and conventions there is a concept in accounting called BUSINESS ENTITY CONCEPT which says business is separate from proprietor so when the proprietor contributes money to business it means business is borrowing money from outsider so it is liability to business so when the capital is liability even the profit earned is liability and repayable to the owner so is treated as liability as per accounting

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