Mr. Shyam has started a business by investing Rs. 3,50,000. He purchased goods for Rs. 43,000, machinery for Rs. 1,25,000, and furniture for Rs. 65,000; Rs. 37,000 remains in hand. An amount of Rs. 80,000 will be treated as business capital, according to which of the following accounting concepts? Accrual concept Business entity concept Matching concept Money measurement concept
Question
Mr. Shyam has started a business by investing Rs. 3,50,000. He purchased goods for Rs. 43,000, machinery for Rs. 1,25,000, and furniture for Rs. 65,000; Rs. 37,000 remains in hand. An amount of Rs. 80,000 will be treated as business capital, according to which of the following accounting concepts? Accrual concept Business entity concept Matching concept Money measurement concept
Solution
The concept that will treat Rs. 80,000 as business capital is the Business Entity Concept. This concept states that the business and the owner are two separate entities. In this case, Mr. Shyam's personal money (Rs. 80,000) is considered separate from the business's assets and liabilities. Therefore, this money is treated as capital invested into the business.
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