Question

Why are profits and liabilities on the same side of the balance sheet?

Answer 1

The right side of the balance sheet, liabilities and owner's equity, describes who owns the assets of the business. Those not due to the creditors belong to the owners. The owner's interest, of course, includes the profits.

Answer 2

If you're talking about retained earnings, it's there on that side to balance the balance sheet.. . The general equation is . . Assets = Liabilities + Shareholders Equity (which is basically the same thing as retained earnings). This is one of the fundamental formulas in accounting.. . If the company makes some money, cash will go up, so assets go up. But liabilities didn't really go up, so the SE has to go up to keep the balance.

Answer 3

so what if they are! profits still remain profits and liabilities (not losses) still remain the same

Answer 4

Profits are not listed on a balance sheet, assets are. If you are refering to assets, they are not even listed on the same side of the balance sheet as liabilities. They are on the opposite side as assets, and weigh against the assets of the company. This is why it is called a "balance sheet."