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Proprietor’s personal travelling expenses are not to be charged in business accounts. It is due to ______ concept.
- a)Materiality
- b)Conservatism
- c)Going concern
- d)Entity
Correct answer is option 'D'. Can you explain this answer?
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Verified Answer
Proprietor’s personal travelling expenses are not to be charged ...
d) Entity.
The entity concept is a fundamental principle in accounting that states that a business should be treated as a separate entity from its owner(s) and other entities. This means that the business and its owner(s) should have separate financial records and accounts, and the transactions of the business should be recorded separately from the personal transactions of the owner(s). In accordance with this principle, the proprietor's personal travelling expenses should not be charged in the business accounts because they are personal expenses that are not related to the business. Charging these expenses to the business accounts would violate the entity concept by mixing the personal and business transactions of the owner.
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Proprietor’s personal travelling expenses are not to be charged ...
Entity Concept:
The entity concept in accounting states that the business entity is separate from its owners. This means that the business's financial transactions should be kept separate from the personal transactions of the owner.
Explanation:
- When a proprietor's personal travelling expenses are not to be charged in business accounts, it is because of the entity concept.
- According to this concept, the business is treated as a separate entity from the owner, and therefore personal expenses of the owner should not be mixed with business expenses.
- Charging personal expenses to the business accounts would violate the entity concept and could lead to inaccurate financial reporting.
- By keeping personal expenses separate from business expenses, the financial statements provide a true and fair view of the business's financial position and performance.
- This ensures that stakeholders can rely on the financial information for making informed decisions.
In conclusion, the entity concept plays a crucial role in maintaining the integrity and reliability of financial reporting by ensuring that personal expenses of the proprietor are not charged to the business accounts.
The entity concept in accounting states that the business entity is separate from its owners. This means that the business's financial transactions should be kept separate from the personal transactions of the owner.
Explanation:
- When a proprietor's personal travelling expenses are not to be charged in business accounts, it is because of the entity concept.
- According to this concept, the business is treated as a separate entity from the owner, and therefore personal expenses of the owner should not be mixed with business expenses.
- Charging personal expenses to the business accounts would violate the entity concept and could lead to inaccurate financial reporting.
- By keeping personal expenses separate from business expenses, the financial statements provide a true and fair view of the business's financial position and performance.
- This ensures that stakeholders can rely on the financial information for making informed decisions.
In conclusion, the entity concept plays a crucial role in maintaining the integrity and reliability of financial reporting by ensuring that personal expenses of the proprietor are not charged to the business accounts.
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Proprietor’s personal travelling expenses are not to be charged in business accounts. It is due to ______ concept.a)Materialityb)Conservatismc)Going concernd)EntityCorrect answer is option 'D'. Can you explain this answer?
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