Why P&L A/C debit balance(Loss) shown under Assets side??????????????????
Ans:
When profit earned company is liable to shareholders(owner)
when loss incurred Shareholders(owners) are liable to company
It is because basic concept called "diffrent entity concept" i.e., owner is diffrent and bussines is diffrent
so when loss inurred to business owner should bring that much loss to compnay
and we can written off in future financial years with profits.
Applying the business entity principle, the profit generated by the business belongs to the owners and hence the business has a liability to pay the profit to them. in the same way loss,is to be borne by the owners. since it is receivable from the owners, it is an asset for the business.
CAclubindia
