Why are rules of debit and credit same for liability and capital?

Asked by Last Modified  

5 Answers

Learn Accountancy +1 Class XI-XII Tuition (PUC)

Follow 8
Answer

Please enter your answer

Rishana PP

Language Trainer and Parenting Coach

According to the accounting entity concept, business is seperated from its owner.So the investment made by the owner (ie capital) is the fund that is to be repaid to the owner itself, at the very last when the company winds up. Liability is the amount the business owe to an outsider.Same way, capital...
read more
According to the accounting entity concept, business is seperated from its owner.So the investment made by the owner (ie capital) is the fund that is to be repaid to the owner itself, at the very last when the company winds up. Liability is the amount the business owe to an outsider.Same way, capital is also the amount the business owe to owner who is treated like an outsider. So liabilty and capital are having the same rule as both of these are the one business owes to others. read less
1 Comments
Dislike Bookmark

Company form of organization by definition, is the organization registered under Companies Act, 2013 or any previous Compnaies Act of India. Companies Act cleatly states that " Company is a distinct legal entity" that is it is sepaprate from its owner. Thus company is treated as an independent entity...
read more
Company form of organization by definition, is the organization registered under Companies Act, 2013 or any previous Compnaies Act of India. Companies Act cleatly states that " Company is a distinct legal entity" that is it is sepaprate from its owner. Thus company is treated as an independent entity and capital is the amount owed by the Company to the owners. read less
Comments
Dislike Bookmark

Every business acquires funds from internal as well as from external sources. According to the business entity concept, the amount borrowed from external sources together with internal sources like, capital invested by proprietor, is termed as liability to the business. Business entity concept treats...
read more
Every business acquires funds from internal as well as from external sources. According to the business entity concept, the amount borrowed from external sources together with internal sources like, capital invested by proprietor, is termed as liability to the business. Business entity concept treats business and business owner separately. Capital of the owner is treated as liability to the business because the business has to repay the amount of capital to owner, in case of closure of business. As liability incurred is credited, in same way, fresh capital introduced and net profit increases the owner’s capital, and thus, capital is credited. On the other hand, if liability is paid, it reduces liability, and so, it is debited. Likewise, drawings from capital and net loss reduce capital, and hence, capital is debited. So, rules of debit and credit are same for both liability and capital. read less
1 Comments
Dislike Bookmark

Capital is known as internal liability which is to be paid only after paying other liabilities. Other than Capital, other liabilities are known as external liabilities. As both are liabilities rules are same
Comments
Dislike Bookmark

Commerce, law, tutor in Kasumpti Shimla

As per company act 2013 A Company is a separate legal entity which can sue and can be sued and the separation of management is a major characteristics that the company being managed by the directors appointed by shareholder of the company. So it is well clear that shareholder are those person's or entities...
read more
As per company act 2013 A Company is a separate legal entity which can sue and can be sued and the separation of management is a major characteristics that the company being managed by the directors appointed by shareholder of the company. So it is well clear that shareholder are those person's or entities who invest a definite amount in a company and a company the receiver of this amount becomes debtor of those shareholder as company have to return back this money in future . Moreover the shareholding is the liability of a company which shall be paid by the company to it's shareholders in future as and when required . Shareholder investment money is called capital and it is hence proved that it shall be in liability side of balance sheet of a company read less
Comments
Dislike Bookmark

View 3 more Answers

Related Questions

What do you mean by principal of conservatism in accountancy?
The conservatism concept is a concept in accounting which refers to the idea that expenses and liabilities should be recognised as soon as possible in a situation where there is uncertainty about the possible...
Akash

What is the difference between Bad debts and bad & doubtful debts. What are the legal compliances for the provisions for doubtful debts and bad debts recovered after being written off. 
Both are pretty much same.. Bad debts amount to be transferred to P/L a/c (dr side) Baddebts recovered P/L credit side as income Provision on doubtful debts to be deducted from debtors in balance sheet..
Suneha Sharma
1 0
7
difference b/w cash & cash eqivalant..
Cash is basically the money that is available with us in liquid form.And cash eqivalent are those items which can be converted into liquid form as and when required like fixed deposit ,they can be converted...
Madhav
What are the fixed assets? Give example.
as per as 10 fixed asset is an asset which is beingh kept in the business for the purpose producing goods or rendering services i e that asset is not being held for the purpose of sale in the normal course...
Vishal
0 0
5

What is matching concept in acvount? 
Cost should match with revenue for that period
Harender

Now ask question in any of the 1000+ Categories, and get Answers from Tutors and Trainers on UrbanPro.com

Ask a Question

Related Lessons

Price Earnings Ratio
S

S. Lakshmi Priya S.

0 0
0
Recording Transactions in Accounting Journal

Shashi Shankar

0 0
0
Why Tally is most popular accounting software in India?
Why is Tally the most popular accounting software in India? The top 10 reasons follow. 1.Easy maintenance : Maintaining an accounting software package hasn’t been more comfortable. A transformation...

Bright Computer Education

1 0
0
Introduction To Accounting: Part 5: Financial Statements
Throughout the year, a number of Business Transactions take place. At the end of the year, any businessman would want to know whether he has made any profit during the year, and if so, what is the amount...

Nishant Kumar

0 0
0
Be Exam Oriented while studying for the Exams
Examinations are the ultimate test of the student.Even if one is doing his/her best during school/college days and confidently handling any academic questions until unless he/she scores good marks in Exams/Tests...

Rabindra K.

0 0
0

Recommended Articles

How To Choose The Right School For Children?

Quality education does not only help children to get a successful career and life, but it also hugely contributes to society. The formal education of every child starts from school. Although there are numerous schools, parents find it challenging to choose the right one that would fit their child. It is difficult for them...

Read full article >

Science, Arts Or Commerce - Which One To Go For?

Once over with the tenth board exams, a heavy percentage of students remain confused between the three academic streams they have to choose from - science, arts or commerce. Some are confident enough to take a call on this much in advance. But there is no worry if as a student you take time to make choice between - science,...

Read full article >

6 Exam Hall Tips To Follow, For Every Good Student

Appearing for exams could be stressful for students. Even though they might have prepared well, they could suffer from anxiety, tension etc. These are not good for their health and mind. However, following a few exam preparation tips can save them from all these and help them to score good marks. Let’s find out all...

Read full article >

The Trend of E-learning and it’s Benefits

E-learning is not just about delivering lessons online. It has a much broader scope that goes beyond manual paper or PowerPoint Presentations. To understand the reach of E-learning and how the whole process works in developing the Educational system, we will discuss a few points here. Let us find out how this new learning...

Read full article >

Find Grade 11 Tuition near you
Grade 11 Tuition in Delhi
Grade 11 Tuition in Bangalore
Grade 11 Tuition in Hyderabad
Grade 11 Tuition in Kolkata
Grade 11 Tuition in Mumbai
Grade 11 Tuition in Chennai
Grade 11 Tuition in Pune
Grade 11 Tuition in Gurgaon
Grade 11 Tuition in Noida
Grade 11 Tuition in Ghaziabad

Looking for Class 11 Tuition ?

Learn from the Best Tutors on UrbanPro

Are you a Tutor or Training Institute?

Join UrbanPro Today to find students near you