Question

Which one of the following is an ingredient of the entity convention of accounting?

• A. The owner of a unit and the unit itself is one and the same
• B. The owner and the unit are treated separately
• C. No separate accounts for the unit is required
• D. The unit is a private affair of the owner, hence no accounting is required

Answer 1

The correct option is B The owner and the unit are treated separately

Business Entity Concept states that the business man is separate from the business. Thus, the amount invested by the owner in the business is known as the capital and is liability for the business. This is a universal to all the forms of business whether it is sole proprietorship, partnership firm or a joint stock company.
Therefore, the owner and business are treated separate.