Bob Johnson is the sole owner of Johnson's Carpet Cleaning ...

[P68T]

Bob Johnson is the sole owner of Johnson's Carpet Cleaning Service. Bob purchased a personal automobile for10,000 cash plus he took out a loan for 20,000 in his name. Describe how this transaction is related to thebusiness entity concept.

Question 2

Which of the following does not represent a common approach to budgeting expenditures?
 
  A. Zero-base budgeting.
  B. Object-of-expenditure budget.
  C. Program budgeting.
  D. Marginal increase budgeting.

[carolinefletcherr]

Answer to Question 1

Under the business entity concept, economic data is limited to the direct activitiesof the business. The business is viewed as separate from its owner. Therefore,when Bob buys a personal automobile, it is not listed on the books of Johnson'sCarpet Cleaning, unless Bob invests it in the business. In this case, the loan is apersonal debt and not a liability of the company, and the cash is from Bob'spersonal account and not the company's account.

Answer to Question 2

D

[P68T]

Gracias!

[lcapri7]

Excellent