Question

What is business entity principle?

Answer 1

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$\mathfrak{\blue{Q.}}$What is business entity principle?

$\mathfrak{\blue{Ans.}}$ According to business entity principle business is considered a separate entity distinct from its owner. The proprietor of the business is considered as a creditor of the business to the extent of his capital. is capital is considered as liability of the form similar to borrowing from outsiders. Thus, separate set of books of account is kept and maintained for recording business transactions. Transactions are to be recorded from the point of view of the business entity and not from the point of view of the proprietor.

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Answer 2

The business entity concept states that the transactions associated with abusiness must be separately recorded from those of its owners or otherbusinesses. Doing so requires the use of separate accounting records for the organization that completely exclude the assets and liabilities of any otherentity or the owner.