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Question
According to Business Entity Concept:
Options
Distinction should be made between fixed assets and current assets.
Distinction should be made between business transactions and personal transactions.
Distinction should be made between Capital expenditure and revenue expenditure.
Accounting equation is always true.
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Solution
Distinction should be made between business transactions and personal transactions.
Explanation:
The Business Entity Concept states that a business is treated as a separate legal entity from its owners. This means that there should be a clear distinction between the business's financial transactions and the personal financial transactions of its owners. The financial records of the business should only include business transactions, ensuring that the financial statements accurately reflect the business's financial position.
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RELATED QUESTIONS
Explain the Business Entity Concept.
Justify the following:
Every transaction is recorded in at least three accounts.
This concept assumes that the business will continue to exist for a long time in the future.
This principle suggests that every debit has a corresponding and equal credit.
According to this principle, revenue is deemed to be realised when the goods have been transferred or the services have been rendered to a customer.
What is business entity concept of accounting?
"Every transaction affects at least three accounts." Comment.
Explain the money measurement principle of accounting.
Explain matching principle of accounting.
Explain the revenue principle.
