23 May 2013
Why is the balance sheet of a proprietorship firm prepared seperately and not together with the propreitor?? The propritorship firm has no seperate legal status. I have come across rare cases where balance sheet of proprieotr and propritorship firm were prepared together. Whereas in most cases both the balance sheets are prepared seperately. Hence what could be the possible reasons behind preparing seperate balance sheet of a propritor and a propritorship firm.
22 June 2013
It is based on basic accounting principle of Business entity concept
Business entity concept This concept assumes that, for accounting purposes, the business enterprise and its owners are two separate independent entities. Thus, the business and personal transactions of its owner are separate. For example, when the owner invests money in the business, it is recorded as liability of the business to the owner. Similarly, when the owner takes away from the business cash/goods for his/her personal use, it is not treated as business expense. Thus, the accounting records are made in the books of accounts from the point of view of the business unit and not the person owning the business. This concept is the very basis of accounting
27 June 2013
Ok sir. This thing is pretty clear now. Just had one thing to clarify that in those few rare cases in which Balance sheet of proprietor and Proprietorship firm were prepared on a consolidated basis. That would be considered incorrect in the accounting sense?
CAclubindia
