The Business Entity Concept assumes:
AThe business and its owners are two separate independent entities for accounting
BThe business is owned by all employees
CThe owner is personally liable for business expenses
DFamily expenses are recorded as business expenses
Answer & Solution
Correct answer: A. The business and its owners are two separate independent entities for accounting
1. Per OCR: "for accounting purposes, the business enterprise and its owners are two separate independent entities."
2. When owner invests cash, it is liability of business to owner.
3. Owner's personal transactions stay separate.
_Source: ICMAI BoS CMA Foundation Paper 2 (FFCA) — Paper2_07042026.pdf, Module 1 §1.2.2.1 (page 16)_
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