Question

“Proprietor is treated as creditor to the extent of his capital.”

1. Write the relevent accounting assumption

2. Explain the concerned accounting assumption in relation to the statement given.

Answer 1

Accounting Entity Assumption:

This concept assumes that the entity of business is different from its owners. According to this concept all the transactions of the business are recorded in the books of the business from the point of view of the business as an entity and even the owner is treated as a creditors to the extent of his capital.