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Capitalbrought by owner

riya r (student) (35 Points)

22 May 2016

Hi,i have a doubt that why capital is shown on liabilities side can anyone help me in this regard in so detail..

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4 Replies

Deepak (STUDENT) (110 Points)
Replied 22 May 2016

Their is separate legal entity concept in accounting which say that business and his own are different persons.

(Guest)

Likewise, since Liabilities, Owner's Equity (Capital), and Revenue Accounts normally have a Credit Balance in order to Increase the Balance of a Liability, Owner's Equity, or Revenue Account the amount would be entered in the Credit or Right Side Column and the amount would be entered in the Debit or Left Side column

(Guest)

It is correct that capital is treated as credit as it is liability for a business this is because of the Business Entity Concept which which assumes business has a distinct and separate entity from its owners. It means for the purpose of accounting, business and owners are to be treated as two separate entities