Question

Credit balance of profit & loss a/c is shown on the _____________.

• A. assets side of balance sheet
• B. liability side of balance sheet
• C. not shown in balance sheet
• D. half on asset side and half on liability side

Answer 1

The correct option is B liability side of balance sheet

Separate entity concept assumes that the business and its owner are two separate legal entity. Any amount contributed by the owner in business is a liability for the business. Any profit earned in the business has to be transferred to the owner.

Credit balance in profit and loss account is liability for the business and to be shown in balance sheet.