Question

It is one of the basis of the entity concept that money brought by the proprietor into the business is credited to _______ .

• A. proprietor's personal
• B. capital
• C. both (a) and (b)
• D. none the above

Answer 1

The correct option is B capital

The money brought into the business by the owner is called Capital or Owner’s Equity. It is credited to the capital account. The Capital can be brought in cash or assets by the owner. Capital is an obligation of the business that has to be paid back to the owner. Because business is a separate entity from its owner. Therefore, the Capital is shown on the liabilities side of the Balance sheet. The capital account is shown after deducting the Drawings by the owner. Drawings are the amount of cash, goods or assets taken by the owner for personal use from the business.