Business Entity concept

                                                                                                                                   

MBA

Accounting for Managers

ASSIGNMENT

 

Course Code: MMPC-004

Assignment Code: MMPC-004/TMA/JULY/2022 

Coverage : All Blocks

1. Explain the following accounting concepts

(a) Business Entity concept

The business entity concept is a fundamental accounting principle that states that a business entity, such as a corporation, partnership, or sole proprietorship, is separate and distinct from its owners or shareholders. According to this concept, the financial transactions and records of the business should be kept separate from the personal transactions and records of the owners. 

This means that the assets, liabilities, revenues, and expenses of the business should be accounted for and reported separately from the assets, liabilities, revenues, and expenses of the owners. For example, if a sole proprietorship purchases a vehicle for the business, the vehicle is considered a business asset, and its cost should be recorded in the business's accounting records. The vehicle does not belong to the owner personally, even if the owner uses it for personal purposes as well.

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