The entity concept means that…?
Select ONE answer:
- because a firm is separate and distinct from its owners, those owners cannot have access to its assets unless the firm ceases to trade.
- accounts must be prepared for every firm.
- the financial affairs of a firm and its owner(s) are always kept separate for the purpose of preparing accounts.
- None of the above.
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple choice question is suitable for Accounting KS5 classes.
The answer is 3
- A sole trader has access to the assets of his business. He can withdraw cash, stock, etc. These withdrawals are shown in his accounts as drawings.
- Although it is true that accounts have to be prepared for every firm — for example. for tax purposes, this 1’s not because of the entity concept.
- Correct
- Not correct.
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