Study Principles of Accounts notes on Accounting Principles and Concepts for Secondary. Useful for revision, homework, and exam preparation in Zimbabwe.
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ACCOUNTING PRINCIPLES AND CONCEPTS Application of principles and concepts Principle / Concept | The Business Entity Concept Explanation | The business entity concept provides that: - The accounting for a business or organization be kept separate from the personal affairs of its owner, or from any other business or organization. This means that the owner of a business should not place any personal assets on the business balance sheet. - The statement of financial position of the business must reflect the financial position of the business alone. Also, when transactions of the business are recorded, any personal expenditures of the owner are charged to the owner and are not allowed to affect the operating results of the business. Application | Significance of the concept: - The profit of the business as only the business expenses and revenues are recorded and all the private and personal expenses are ignored. - Limits the business from recording of owner's private/personal transactions. - Facilitates the recording and reporting of business transactions from the business point of view - It is the very basis of accounting concepts, conventions and principles. - Capital and Drawings accounts are kept to record amounts the owner gives to or takes from the business AWAKENING THE MIND COMPILED BY CHINGS 0772705459