Question

Why are the rules of debit and credit same for both liability and capital?

Answer 1

The rules of debit and credit are the same for both liability and capital because capital is also considered a liability with the viewpoint of business. In accounting, there is one concept called Business entity concept, According to which business and businessman, both are separate and whatever is invested by the owner of a firm in that firm is a liability for the film. This is the reason that profit earned by the firm is also treated as the liability and shown on the liability side of the balance sheet after adding to the owner's capital.