Question

The proprietor is treated as a creditor to the extent of his capital according to __________.

• A. Cost concept
• B. Business entity concept
• C. Going concern concept
• D. All of the above

Answer 1

The correct option is B 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.