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What is internal and external liability? |
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Answer» Internal liability:- it is the amount payable to the owner by the business. It appears as capital in balance sheet.External liability:- liability which are payable to outsiders. External liability arrives because of credit purchases or loans raised or taken. eg:-creditors, bank loan, bills payable etc. All obligations which a business has to pay back to external parties such as promoters(owners) employees etc.are termed as internal liabilities..example capital, salaries etc....All obligations which a business has to pay back to external parties i.e. lenders vendors etc.are termed as external liabilities..example creditors,taxes, borrowings etc.... |
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