The accounting convention which stipulates that money or goods taken from the business by the owner for personal use should be treated as deductions from ca...

The accounting convention which stipulates that money or goods taken from the business by the owner for personal use should be treated as deductions from capital is

Answer Details

The accounting convention which stipulates that money or goods taken from the business by the owner for personal use should be treated as deductions from capital is the Entity Convention. The Entity Convention in accounting assumes that the business entity and the owner(s) are separate and distinct from each other. This means that the business's financial transactions should be recorded separately from the personal transactions of the owner(s). When the owner(s) take money or goods from the business for personal use, it is considered a withdrawal or a reduction of the owner's capital in the business. The amount withdrawn is recorded as a debit to the owner's drawing account and a credit to the capital account in the business's books. This ensures that the business's financial statements accurately reflect its financial performance and position, without the personal transactions of the owner(s) affecting the business's results. Therefore, the Entity Convention helps to maintain the integrity of the financial records of the business by separating the transactions of the business from the personal transactions of the owner(s). The other options listed, such as cost, prudence, and consistency, do not relate specifically to this convention.