Question

The business enterprise is separate and distinct from its owners and from other business enterprises.

Answer 1

Answer:

The accounting entity concept recognizes a specific business enterprise as one accounting entity, separate and distinct from the owners, managers, and employees of that business. In other words, it means that a company has its own identity set apart from its owners or anyone else.

Explanation:

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Answer 2

Answer:

The concept of business entity assumes that business has a distinct and separate entity from its owners.

Explanation:

The concept of business entity assumes that business has a distinct and separate entity from its owners.

It means that for the purposes of accounting, the business and its owners are to be treated as two separate entities.

Keeping this in view, when a person brings in some money as capital into his business, in accounting records, it is treated as liability of the business to the owner.

Here, one separate entity (owner) is assumed to be giving money to another distinct entity (business unit).

Similarly, when the owner withdraws any money from the business for his personal expenses (drawings), it is treated as reduction of the owner’s capital and consequently a reduction in the liabilities of the business.

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