Question

proprietor invest 6,00,000 capital in business the capital amount is asset or liability why?​

Answer 1

Answer:

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Answer 2

ANSWER :

★ Liability

• ✎ Proprietor invests 6,00,000 capital in business the capital amount is a Liability for the business which is payable to the proprietor.

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EXPLANATION :

Liability is the amount which is required to pay in the future by an entity. It is a future monetarg obligation of the enterprise.

The amount brought in by the proprietor and invester in a business entity for carrying on the business is called Capital It is the obligation of the business to pay the proprietor.

According to Accounting (Business) Entity Concept, the proprietor of the business is always considered as distinct and separate from the business he owns. As the proprietor and the business is separated, hence the money invested by the proprietor in the business is a liability for the business.

• Therefore, when a proprietor invests Rs. 6,00,000 as capital in a business; it is considered as a Liability.