Question

why capital is treated as liability of business.?

Answer 1

Capital is treated as liability of business as business do not present the capital. The capital is presented by the owner or investor. Thus business do not own it, this is only a liability of business to be paid to the owners or investors while winding up ( closing ) the business.

Answer 2

Capital is treated as a liability of business:

It is the amount of money put by the owner to start a business. According to the accounting entity idea, the owner and the firm are two distinct entities. As a result, it should be viewed as a loan from him. As a result, from the perspective of the company, it is responsible for repaying the funds in the future. As a result, capital is a burden.

#SPJ2