Section 1, Unit 1, Lesson 5 Liabilities and capital

Question 1

Liability

Answer 1

Something that a business owes i.e. overdrawn bank balance, bank loan, business credit card, monies owed to suppliers, Taxation owed.

Question 2

Can be divided into:
Current Liabilities (due within 12 months
Non current liabilities (due after 12 months)

Answer 2

Examples of current liabilities:
overdraft, Money owed to suppliers
Examples of non current liabilities:
long tern loan

Question 3

Capital

Answer 3

the amount which the business owes its owners, i.e how much the owners contributed.
profits make up part of the capital until they are withdrawn.

Question 4

capital is a special type of liability

Answer 4

capital is due to the owners, not external organisations i.e. suppliers or banks

Question 5

Assets and liabilities of a business belong to the owners, ie. it is their capital

Answer 5

Assets-Liabilities=capital.