Question

Which accounting concept is applicable to record a transaction entered between owner and business?

• A. Productivity
• B. Going concern
• C. Prudence
• D. Business entity

Answer 1

The correct option is D Business entity

Business Entity Concept:
In accounting business organization and owners are two different identity. Thus business has its own existence separate from owners, creditors etc. This concept is called business entity concept. It means that personal transactions of owners are treated separately from those of the business. Therefore any personal expenses incurred by owners of a business will not appear in the income statement of the entity.