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Items to be Shown on the Liabilities Side

  • Liability: Liability refers to the financial obligations of an enterprise other than owner’s funds.
    • Long term liability: It is a liability which does not fall due for payment in a relatively short period i.e., it is for more than one year. Example: Long term loans/ borrowings etc.
    • Current liability: It is a liability which falls due for payment in a period of one year. Example: creditors, bills payable, outstanding expenses etc.
  • Capital: Capital is the excess of assets over external liabilities. It is the amount invested by the proprietor and it is increased by the amount of profit earned and decreased by the amount of losses incurred and drawings.

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