Question

The proprietor is regarded as the creditor of the business to the extent of capital invested by him in the business. Name and explain the assumption. subject is accounts.
plz give correct answers only .

Answer 1

Answer:

Business Entity Principle:The concept of business entity assumes that business has a distinct and separate entity from its owners.For the purpose of accounting, business and owner are supposed to be treated as two separate entities.Business transactions are recorded from the business point of view and not from that of the owners.The capital invested by the owner in the business is considered as a liability of the business to the owner while money withdrawn out of the business for personal use by the owner is considered as drawings which is ultimately deducted from the capital leading to the reduction in liability of the business.