Business Entity Concept Explained
Автор: SabbasN.n
Загружено: 2026-02-16
Просмотров: 12
Описание:
Under the Business Entity Concept (also called the Economic Entity Assumption), a business is treated as a completely separate entity from its owners—even in sole proprietorships!
Key points every business owner & accounting student should know:
The business and its owners are two independent entities. The business is considered an "artificial person" for accounting purposes.
When an owner invests money, it's recorded as capital (a liability for the business).
When an owner takes money out for personal use, it's a drawing (reduces owner's equity), not a business expense.
All assets, liabilities, revenues, and expenses belong to the business—not the owner personally.
Business financial obligations are distinct from the owner's personal debts.
This principle ensures accurate books, proper taxation, clear financial reporting, and protection of personal assets in many cases.
Essential for sole proprietors, partnerships, and corporations alike! 💼📊
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