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State whether the following statement is True or False. A company is an artificial person.

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State whether the following statement is True or False.

A company is an artificial person.

State whether the following statement is true.

A company is an artificial person.

True or False
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Solution

This statement is true.

Explanation:

Under accounting rules, a company is considered an artificial person because it has a separate legal identity from its owners, known as the Business Entity Principle. This means all financial transactions are recorded from the company’s perspective, not the owner’s personal view. Because the company acts as an independent person, it can own assets, take loans, and enter into contracts under its own name. Consequently, the money invested by the owner is treated as a liability (Capital) that the company owes back to them.
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Formation of a Company
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Chapter 3: Formation of a company - Exercise Q.1 [Page 45]

APPEARS IN

Balbharati Secretarial Practice [English] Standard 11 Maharashtra State Board
Chapter 3 Formation of a company
Exercise Q.1 | Q 4.01 | Page 45
NCERT Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12
Chapter 1 Accounting for Share Capital
Intext questions | Q (a) | Page 7

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