Question

Capital is considered as a
liability for the firm.
Identify the principle

Answer 1

Answer:

Separate Legal entity concept

Explanation:

Its because of 'separate entity concept',(mind that i have not said 'separate legal entity concept'),as per this concept

1. proprietor and business are two different entity (purely for accounting purpose not in terms of law)

AND

2.the accounting shall always be done from business view point not from proprietor view point

Therefore following this concept ,since business has borrowed money (with no guarantee of repayment) it is the liability of the BUSINESS ,but the lender is none other than proprietor we can call this borrowed money as CAPITAL.