JAMB Principles of Accounts 2000 Question 14

Question 14

Accounting Concepts and Conventions

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

A.cost
B.prudence
C.consistency
D.entity.

Show the answer and explanation

Answer: D (entity.)

Explanation

The entity concept treats the business as separate from its owner, so what the owner takes is drawings, reducing capital.