Question

Concept implies that a business unit is separate from its owner.​

Answer 1

Answer:

business entity concept

Answer 2

ANSWER :

❖ Business (Accounting) Entity Concept implies that a business unit is separate from its owner.

• ➬ According to Business Entity or Accounting Entity Concept, the owner of a business is always considered as distinct and separate from the business he owns. The term 'Entity' means 'existence' and therefore "accounting entity" means "existence of an accounting unit, i.e. business.

• ➬ As per Accouting (Business) Entity concept, business unit should have a complete separate set of books of accounts and the business transactions are recorded from the point of view of the firm, not from the point of view of the proprietor. The proprietor must keep accounts of the business from separately, to enable himself to ascertain profit. He must not mix the transactions of household affairs to that of business affairs. To calculate the profit of the busines, accounts of the business must be kept distinctly without mixing the household transactions or other personal transactions.

• ➬ Every transaction is analyzed from the point of view of the business and not from the point of view of the person who own them, i.e, owner of the business. This is known as Business Entity Concept or Accounting Entity Concept.

• ➬ Accounting Entity or Business Entity Concept defines the range and boundaries of the accountant's activity, the type of transaction that are to be recorded in the books of accounts of a business entity. This concept facilitates the recording of transactions taking place between the business and the proprietor which is done through opening of Capital Account and Drawing Account.