Financial Statements Interview Question:

Explain Profit and Loss Account debit balance?

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As per the business entity principle, owner is different from the business. Thus, the profit generated by the business belongs to the shareholders, and hence the business is liable to shareholders for the distribution of profits. In the same way, when loss is incurred in the business it is born by the owners. Hence, it is an asset for the business as it is a receivable from the owners.
Submitted by: Administrator