Accounting Entity Flashcards
What does the Accounting Entity concept state?
The business is separate from the owner and the owner is separate from the business.
How should the owner be viewed for accounting purposes?
It should be determined in what capacity the owner is acting - on behalf of the business or in his personal capacity.
In terms of legal liability, how are the owner and the business viewed in a sole proprietorship?
The owner and the business are seen as one entity.
What is the significance of keeping separate records for business transactions?
It helps maintain clarity about the financial activities of the business and the owner.
True or False: The owner and the business are always considered separate entities.
False.
Fill in the blank: For accounting purposes, the capacity in which the owner is acting should be determined on behalf of the _______ or in his personal capacity.
business
