Question

Which is an example of business entity concept?

• A. Provision for doubtful debts
• B. Treating cash withdrawn by the proprietor for personal use or goods taken for self-consumption as drawing
• C. Valuation of stock at cost or market prices which ever is less
• D. All the three

Answer 1

The correct option is B Treating cash withdrawn by the proprietor for personal use or goods taken for self-consumption as drawing

For all accounting purposes, business and business man are considered two different entities. All business transactions are recorded in business books. Any personal transaction done from business are considered as drawing which in effect decrease owners equity.