Question

Explain business entity concept with example​

Answer 1

ANSWER : The business entity concept states that the transactions related to a business must be recorded separately from those of its owners and any other business. In other words, while recording transactions in a business, we take into account only those events that affect that particular business; the events that affect anyone else other than the business entity are not relevant and are therefore not included in the accounting records of the business.

Example : The owner of a business loans $100,000 to his company. This is recorded by the company as a liability, and by the owner as a loan receivable

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