Find the best tutors and institutes for Class 12 Tuition

Find Best Class 12 Tuition

Please select a Category.

Please select a Locality.

No matching category found.

No matching Locality found.

Outside India?

Search for topics

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

Asked by Last Modified  

CBSE/Class 11/Commerce/Accountancy Tuition/Class XI-XII Tuition (PUC)

Follow 8
Answer

5 Answers

Please enter your answer

Accounts Faculty

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

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

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

Commerce and law Tutor 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

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

View 3 more Answers

Related Lessons

Difference between Book-Keeping and Accounting/Accountancy, Class 11
Helpful for NCERT/CBSE, State Board, ICSE Class 9, ISC, IGCSE/GCSE

Rajiv Vadera | 04 Feb

0 0
0

What are Reserves & Provisions? Lets understand in detail-
Provisions:There are some expenses and losses which are specific to incur, but their amount cannot be known with certainty as they are not yet incurred. It is necessary to make provision for such certain...
A

Arpita S. | 02 Feb

0 0
0

Fictitious Assets - Class 11/12, Book-Keeping and Accountancy, Basic Accounting Terms
Useful for - NCERT/CBSE, ICSE/ISC, IGCSE/GCSE, State Boards

Rajiv Vadera | 20 Jan

0 0
0

Recommended Articles

Class 12 board exam is a milestone in the journey of education. If we compare class 10th and 12th, the complexity level is much higher in 12th. Scoring good marks in the 12th board will not only raise your self-confidence but, help you get through some of the top colleges in the country. With an aim to help students tackle...

Read full article >

At some point of time in life, every student will face the real world of business. So, getting familiar with it at the earliest will help them to understand the skills that are needed in a business. Business Studies is a core paper in Commerce Stream. This subject will help students to get a stronghold of the business...

Read full article >

If the internet has made it s way to all aspects of human life, no far stands classrooms from it. The boons of internet have entered the classrooms in the form of devices and this penetration of technology in the academic system is termed as e-learning. E-learning is a kind of teaching where computers with internet connection...

Read full article >

School, college, university or an open entrance exam, certain rules stands the same for any occasion. Doing mistake in these basic rules related to exams is foolish and simply impacts the examinee s performance. To help students score good and make any exam experience a memorable one, here is a list of six tips to follow....

Read full article >

Looking for Class 12 Tuition ?

Find best Class 12 Tuition in your locality on UrbanPro.

Are you a Tutor or Training Institute?

Join UrbanPro Today to find students near you

Find Best Class 12 Tuition ?

Find Now »

UrbanPro.com is India's largest network of most trusted tutors and institutes. Over 25 lakh students rely on UrbanPro.com, to fulfill their learning requirements across 1,000+ categories. Using UrbanPro.com, parents, and students can compare multiple Tutors and Institutes and choose the one that best suits their requirements. More than 6.5 lakh verified Tutors and Institutes are helping millions of students every day and growing their tutoring business on UrbanPro.com. Whether you are looking for a tutor to learn mathematics, a German language trainer to brush up your German language skills or an institute to upgrade your IT skills, we have got the best selection of Tutors and Training Institutes for you. Read more