Question

Capital is an internal or external liability? State with reason.

Answer 1

Answer:

1. Internal Liabilities means the liability of business towards it's owners, i.e. balance in the capital account. 
2. External Liabilities means what a business owes to outsiders like bank loan , creditors and debentures etc.
3. Capital is the money contributed by owners or shareholders to the firm. Therefore, capital is an internal liability.

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