Why Capital is Shown In Liabilities Side

Because, Capital or Equity or Owner's Equity is the rights of owners of the business, who invested into the business, especially in case of Sole Proprietorship, to whom the assets of the business are established for the profitable activities (Revenues & Expenses) of the business. So, the reporting of capital on Balance sheet is followed by the Business Entity Concept that says Business Transactions must be recorded separately from its owners. Any dealing or exchange by the business with the owner must be recorded with the name of the business as a distinct from its owners.

Actually, there are two types of Liabilities or there are two parties involved against the claim or rights (Assets) of the business. External Liabilities and Internal Liabilities (Equity or Owner's Equity). Internal liabilities are payable by the business to owners of the business and it is also known as Capital or Equity i.e., the right of the owners of the business who invested into the business while external liabilities are known as Liabilities, i.e. the rights of the outsiders of the business such as Suppliers or Accounts Payable, Banks , Financial Institutions, etc. That is why, Equity or Capital is recorded on Liabilities & Equity Side Under the Section of Liabilities & Equity in the Balance Sheet.