7. Write note on the following:
a) Business entity concept.
b) Accrual concept.
c) Going concern concept.
Answers
a)Under the business entity concept, a business holds separate entity and distinct from its owners. " The entity view holds the business 'enterprise to be an institution in its own right separate and distinct from the parties who furnish the funds" An example is a sole trader or proprietorship.
b)The accrual principle is an accounting concept that requires transactions to be recorded in the time period in which they occur, regardless of when the actual cash flows for the transaction are received. The idea behind the accrual principle is that financial events are properly recognized by matching revenues.
c)The going concern principle is the assumption that a business will continue to exist in the near future, in other words, that it will not liquidate or be forced out of business.