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Question
An obligation of the entity to owner's is treated as a liability in the balance sheet according to ___________.
An obligation of the entity to owner's is treated as a liability in the balance sheet according to ___________.
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Solution
The correct option is D Business entity concept
According to Business Entity Concept, a business is treated as a separate entity and is distinct from it's owners. When a proprietor introduces capital in his own business, the capital is considered as liability from business point of view. Similarly, when he withdraws any money for personal use it is treated as reduction in the liability of business.
According to Business Entity Concept, a business is treated as a separate entity and is distinct from it's owners. When a proprietor introduces capital in his own business, the capital is considered as liability from business point of view. Similarly, when he withdraws any money for personal use it is treated as reduction in the liability of business.
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