'Capital is a liability for the business' Explain this statement with principle applying
Dear Student,
The underlying concept that applies to the above quoted statement is 'Business Entity Concept'. As per the concept, business and the proprietor or the owners both are separate individual entities. They have their own existence. The capital that is invested into business is actually a liability for the business (even though towards the owners). The investment is made to make the funds grow by making the business profitable.
The underlying concept that applies to the above quoted statement is 'Business Entity Concept'. As per the concept, business and the proprietor or the owners both are separate individual entities. They have their own existence. The capital that is invested into business is actually a liability for the business (even though towards the owners). The investment is made to make the funds grow by making the business profitable.