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Question

An obligation of the entity to owner's is treated as a liability in the balance sheet according to ___________.


A
Going concern concept
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B
Dual aspect concept
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C
Business entity concept
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D
All of the above
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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.

Principles and Practice of Accounting

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