Commercial Applications
According to Business Entity Concept:
- 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.
Answer
Distinction should be made between business transactions and personal transactions.
Reason — The Business Entity Concept treats the business as a unit separate and distinct from its owner. Therefore, a clear distinction is made between business transactions and the owner's personal transactions. Personal assets and personal expenses of the owner are not recorded in the business books.
Related Questions
Assertion (A): The Going Concern Principle assumes that a company will continue its operations for the foreseeable future.
Reason (R): This principle allows fixed assets and liabilities to be reported at their historical cost rather than their liquidation value.
- A is true but R is false
- A is false but R is true
- Both A and R are true and R explains A.
- Both A and R are true but R does not explain A.
This principle is an exception to the principle of full disclosure.
- Materiality
- Consistency
- Conservatism
- Timeliness
Accounting means ……………
- Keeping an account of money received
- Keeping an account of money spent
- Keeping an account of money spent and loan received.
- Keeping an account of money received and money spent.
According to the …………… principle of accounting, transactions are recorded on the assumption that the business will exist for an indefinite period of time.
- Business Entity Concept
- Dual Aspect
- Going Concern Concept
- Money Measurement Concept