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Tuesday, April 20, 2010

Liability side of Balance Sheet

It is the amount of money invested by the businessman into the business. Net profit earned increases the amount of capital whereas net loss and drawing decrease the capital.

Long term liabilities:
Those liabilities which are spend after long period say after 5 or 10 years are called long term liabilities. Examples of such liabilities are:
  • Bank loan
  • Debentures
  • Bonds
  • Mortgage
Current liabilities:
These liabilities are to be repaid within a short period usually within an accounting year such as;
  • Creditors
  • Bills payable
  • Bank overdraft
  • Outstanding expenses
  • Provision for dividend and taxation
  • Advance income
  • Short term loan.

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