Explain Full Disclosure and Business Entity principle of accounting.
Explain Full Disclosure and Business Entity principle of accounting.
Full Disclosure: This principle implies that financial statements should disclose all material information which is required by the proprietor and other users to assess the final accounts of the business unit. This principle has been given legal recognition by the Companies Act, 1956 which had made ample provisions for the disclosure of material information in company accounts.
Business Entity Principle: This principle assumes that, for accounting purposes, business and businessman are two separate entities. All the business transactions are recorded in the books of accounts from the point of view of business and not from the point of view of a businessman. A businessman is treated as the creditor of the business to the extent of his capital. The capital introduced by the proprietor is treated as the liability from the point of view of the business.
Full Disclosure: This principle implies that financial statements should disclose all material information which is required by the proprietor and other users to assess the final accounts of the business unit. This principle has been given legal recognition by the Companies Act, 1956 which had made ample provisions for the disclosure of material information in company accounts.
Business Entity Principle: This principle assumes that, for accounting purposes, business and businessman are two separate entities. All the business transactions are recorded in the books of accounts from the point of view of business and not from the point of view of a businessman. A businessman is treated as the creditor of the business to the extent of his capital. The capital introduced by the proprietor is treated as the liability from the point of view of the business.
