Why profit is listed with the liabilities in the Balance Sheet?

Assets and Liabilities in the Balance Sheet

• Assets in the Balance Sheet are the debit balances in the bookkeeping system.
• Liabilities in the Balance Sheet are credit balances in the bookkeeping system.

Credit and Debit Balances in the Profit Statement

• In the Profit Statement, sales and income are the credit balances.
• In the Profit Statement, costs are the debit balances.
• The net total of all the balances is the profit or loss.
• This one figure (profit or loss) goes into the Balance Sheet as a single item.
• A profit is a credit which is listed with the liabilities.

Explanation on why profit (a credit balance in the Profit Statement) is listed with liabilities in the Balance Sheet

• The explanation is that the profit belongs to someone outside the business. 
• If the Balance Sheet is for a company, the profit belongs to the shareholders.
• It may one day be paid to them in the form of a dividend or by return of capital on the winding up of the company.