Why net profit is shown in the liability side of the balance sheet?

Questions by herebikash   answers by herebikash

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  • Jan 1st, 2010

Net Profit is the amount earned by the Owner and it is always added to the Capital. As Capital is liabilty of the firm/Co. therefore it is shown on the liability side of the balance sheet.

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Meenu sharma

  • Nov 4th, 2014


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  • Dec 5th, 2014

as we know net profit is added with capital and capital is treated liability side of the balance sheet so that it treated as liability side of the balance sheet .

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  • Dec 29th, 2014

Net profit is a profit of the compnany but the amount earn by the capital so it has to be pay the shareholders so it is treated as liability.

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  • Mar 2nd, 2015

as per accounting concepts and conventions there is a concept in accounting called BUSINESS ENTITY CONCEPT which says business is separate from proprietor so when the proprietor contributes money to business it means business is borrowing money from outsider so it is liability to business so when the capital is liability even the profit earned is liability and repayable to the owner so is treated as liability as per accounting

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  • May 11th, 2017

Assume that I started a business with a capital 4000..... i made no transaction.. if I prepare a balance sheet for it how it will be balanced now?

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rahul patidar

  • Oct 1st, 2021

If you not made any type of transaction it mean you have not earned any type of profit.So that not need to shown in balancesheet.


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  • Nov 21st, 2021

Because Profit is liability of the business for its
propriters or share holders

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