Capital is a liability for the business ,. Explain statement with the principle applied.

Explanation

According to Accounting Entity or Business Entity Principle capital is a liability for the business . This principle requires that for accounting purpose , a distinction should be made between business affairs and personal affaired and in the accounting books of the business only business transaction be recorded . The amount invested by the owner from the business for his personal use is recorded in Drawings Account . The amount in the credit of the Capital Account is a liability of the business towards the owner .