if a propritor(individual) doing business of fertilizers and pesticides. he takes bank loan for house construction (self occupation),is it compulsory to include bank loan a/c taken to build houseand house construction accounts in business financial statements.
1 Replies
Keval
(Consultant)
(120 Points)
Replied 09 September 2011
Dear Chaitanya,
As per "Business entity concept" business is treated sperately from its owners. Account are prepared to give the real picture of the business and not who own the business. The private transaction of the owner are seperate and cannot be merged with the accounts of business as it would not elicit the correct picture of the business. Further, Business entity concept is for all organisation, let it be individual.
Even the proprietor is treated as creditor to the extent of capital which is show in the liability side of the balance sheet.
In nutshell, bank loan for house construction for self occupation cannot be merged with business transaction and cannot be shown in the Financial statments.
Regards
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