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Which of the following is an application of the business entity concept?
A A sole trader paying their personal tax bill from the business bank account accounts for it as drawings
B Each transaction has an equal and opposite effect
C The directors of a company are treated as employees for the purpose of accounting
D Separate capital and current accounts are maintained for each partnerAnswer is A. Why D is not correct? Capital account and current account has transaction like drawings.
D is not correct because even with capital and current accounts it is still treating the owners as separate from the business (just as we do with a sole trader).
You are not expected for Paper FA to understand the use of capital and current accounts – partnership accounting was removed from the syllabus many years ago.
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