Discussion
Which of the following is a result of separate entity concept ?
Answer: C
The separate entity concept results in owners capital and drawings.
Under the business entity concept the business is treated as distinct from its owner. That is why the money the owner brings in is recorded as capital, a liability of the business to the owner, and what the owner takes out for personal use is recorded as drawings.
Research and development, buying and selling, and sale of scrap are ordinary business transactions that would be recorded under any concept; they are not consequences of separating the owner from the business.
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