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The Accounting Environment and Equation
Quick questions on Accounting entities and users explained: O-Level Principles of Accounts
4short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is the accounting entity concept?Show answer
The accounting entity concept treats the business as separate from its owner, even when, in law, a sole proprietor and the business are the same person. In the books, the business is the "entity"; the owner is an outsider who has invested capital and who can take drawings.
What is q1?Show answer
Name the concept that requires an owner's personal expenses to be kept out of the business accounts. [1 mark]
What is q2?Show answer
Classify each as capital, drawings or a business expense: the owner pays in \5\,000\ cash for a holiday; the business pays \400$ for shop insurance. [3 marks]
What is q3?Show answer
Give one internal user and one external user of a business's accounts, with the need of each. [4 marks]
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