CIMA BA3 · Chapter 2 · Question 6 of 8
The owner of a shop takes goods from inventory for her family's personal use. These are recorded as drawings rather than as a business expense. Which concept explains this treatment?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Business entity concept
Explanation
The business entity concept treats the business as separate from its owner. Goods taken for personal use are not a cost of earning business income, so they are recorded as drawings, which reduce the owner's capital.
More Accounting concepts and qualitative characteristics MCQs
- Q8Which of the following items of expenditure should be treated as capital expenditure?
- Q1According to the IASB Conceptual Framework, what are the two fundamental qualitative characteristics of useful financial information?
- Q2Which of the following is NOT an enhancing qualitative characteristic in the IASB Conceptual Framework?
- Q3Financial statements are normally prepared on the assumption that the entity will continue in operation for the foreseeable future. Which…
- Q4Under the accruals basis of accounting, transactions are recognised: