In the preparation of account, the owners of the business and the business concerned are treated as:
Answer Details
In the preparation of accounting records, the owners of the business and the business concerned are treated as separate legal entities.
This means that the business is treated as a distinct entity from its owners, and is recognized as having its own financial position, income, and expenses. This is because the business is a separate legal entity, meaning it has its own legal status and is capable of entering into contracts and owning property.
For example, if a business takes out a loan, the debt belongs to the business and not to the individual owners. Similarly, if the business makes a profit, the profit belongs to the business and not directly to the owners.
Separating the business from its owners in this way allows for a clear and accurate picture of the financial performance of the business, and enables the owners to assess the success of the business as a whole. It also ensures that the business is held responsible for its financial obligations and liabilities, rather than the individual owners.