A sole trader paid for personal residential rent using funds directly from the firm's bank account. The bookkeeper debited the business rent expense account and credited the bank account. Which fundamental accounting concept has been violated, and how should this transaction be correctly recorded?
- The business entity concept has been violated; the amount should be debited to the drawings account and credited to the bank account.Cevap
- BThe going concern concept has been violated; the amount should be capitalized as a long-term business asset because the owner and sole proprietorship share the same legal identity.
- CThe scope of bookkeeping has been violated; personal transactions paid via bank transfers must be omitted entirely from all accounting records.
- DThe accrual concept has been violated; the payment must be treated as a prepaid operational expense in the statement of financial position.
Cevap
The business entity concept has been violated; the amount should be debited to the drawings account and credited to the bank account.
The business entity concept establishes that a business unit is treated as a separate entity from its owner(s) for accounting purposes. Personal expenses of the owner settled with business money are withdrawals of capital (drawings) and must be debited to the drawings account rather than debited to business expense accounts.
Adım Adım Çözüm
Anahtar Kavram
Business Entity Concept and Treatment of Drawings