PRC-1 · Chapter 1 · Question 66 of 100
Mr. Zafar, the owner of a retail business, withdrew Rs. 20,000 from the business cash till to pay for his personal vacation. The requirement to record this as 'Drawings' instead of a business expense is based on the:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Business entity concept
Explanation
The business entity concept dictates that the business and its owner are entirely separate entities for accounting purposes, so personal withdrawals cannot be treated as business expenses.
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