Commercial Applications
Which of the following statement(s) is/are correct?
Statement 1: The Going Concern Concept assumes that a business will not cease operations in the near future.
Statement 2: The Business Entity Concept implies that the business and its owner are separate entities, and the owner's personal transactions should be recorded in the business books.
- Only Statement 1 is correct
- Only Statement 2 is correct
- Both Statements 1 and 2 are correct
- Both Statements 1 and 2 are false
GAAP
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Answer
Only Statement 1 is correct
Reason — Statement 1 is true — the Going Concern Concept assumes the business will continue to exist for an indefinite period of time. Statement 2 is false because, although the Business Entity Concept treats the business and its owner as separate entities, the owner's personal transactions should NOT be recorded in the business books — only business transactions are recorded.
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