CSEET · Fundamentals of Accounting · Basic Concepts and Principles of Accounting
Ravi, a sole proprietor, takes goods costing ₹8,000 from his shop for his family's use and makes no entry because 'the shop belongs to him anyway'. Which concept is violated?
The business entity concept is violated. The business is treated as distinct from its owner, so goods of ₹8,000 taken for personal use are drawings that must be recorded, reducing stock and the proprietor's capital, even though the owner and the business are the same person legally.
- ABusiness entity conceptCorrect
- BGoing concern concept
- CAccrual concept
- DRealisation concept
Explanation
Under the business entity concept the business is treated as separate from its owner. Goods taken by the owner are drawings and must be recorded, reducing stock and the owner's capital. Ignoring this treats owner and business as one. Going concern and accrual are not the issue here.
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