Question

Which one of the following items would fall under the definition of a liability?

• A. Cash
• B. Debtor
• C. Owner's equity
• D. None of these

Answer 1

The correct option is C Owner's equity

Separate entity concept defines that owner and the business both are separate legal entity. Accordingly, owner is treated as the creditors of the business.

Capital contributed by the owner is a liability for the business and to be shown in balance sheet.