Question

Keeping the records of the business separate from the personal records of the owner of the business is said to be adherence to which accounting principle or concept?

• A. Continuing-concern concept
• B. Business entity principle
• C. Realization principle
• D. Objectivity principle

Answer 1

The correct option is B Business entity principle

Business Entity Concept defines that owner and the business are treated two separate entity in the eye of law.

Hence , if any amount is contributes as capital in the business, this will be treated as liability in the business books. On the similar lines, if any personal expenses are paid from business, this will be treated as drawings and to be debited to capital account.