Which accounting treatment follows the business entity concept?
Correct answer: C. Recording owner investment as business capital
- A. Recording the owner's personal rent as business expense
- B. Combining the owner's bank account with business cash
- C. Recording owner investment as business capital
- D. Treating owner withdrawals as business revenue
Explanation
The business entity concept treats the business as separate from its owner. Money introduced by the owner is therefore recorded in the business books as capital, not as revenue.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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