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What is accounting entity concept? why is it important in
Accounting.
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Answer Posted / h.r. sreepada bhagi
As per the Business Entity concept, the business
unit/firm/company has a distinct existence from it's owners.
Hence the personal transactions of the
proprietor/partner/shareholder should not be mixed with the
business transactions. From this view point, the owner,
partner or the shareholder is also a creditor to the extent
of money invested by them in the business or in other words
the net-worth of the business entity.
Importance lies in the fact that the effectiveness of the
business can be measured irrespective of who has put in the
money (Income generating ability). Further in order to
comply with statutory requirements of certain types of
business organisations also this concept is necessary.
| Is This Answer Correct ? | 12 Yes | 7 No |
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Trial balance as on 31st March, 2014 Particulars Debit Pula Particulars Credit Pula Wages 14 100 Dividends received 4 300 Salaries 13 000 Bank overdraft 41 000 Opening Stock 40 000 Returns 1 000 Machinery 49 000 Creditors 14 200 Investments 30 700 Sales 258 500 Drawings 23 000 Capital 30 000 Purchases 130 000 Returns 2 000 Debtors 18 000 Advertising 13 400 Interest 4 800 Cash 11 000 349 000 ======= 349 000 ======== Additional information: 1. Closing stock is valued at P53 000. 2. Wages include P350 being advance against wages. 3. Wages include P1 000 paid for erection of machinery. 4. A purchase of stationery for P430 has been inadvertently included in the Purchases account. 5. A sale of investments with a book value of P2 600 for P2 500 has been included in the Sales Account. 6. Salaries include P150 per month paid to the proprietor’s domestic servant. 7. Machinery is to be depreciated by 10 per cent. Required: a. The revenue statement (Trading and Profit and Loss Account) for the year ended 31st March 2014 and b. Statement of financial position (Balance Sheet) as on 31st March, 2014.
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