Assertion (A): Capital is treated as an internal liability of the business. Reason (R): The business and its owner are considered distinct entities under the Business Entity Concept. MCQ with Answer and Explanation
Assertion (A): Capital is treated as an internal liability of the business. Reason (R): The business and its owner are considered distinct entities under the Business Entity Concept.
A. Both A and R are true but R is not the correct explanation of A
B. A is false but R is true
C. A is true but R is false
D. Both A and R are true and R is the correct explanation of A
Answer: Option D
Solution (By JKSSB Mock Tests)
The Business Entity Concept treats the owner as a separate entity from the business, making the capital invested by the owner an internal liability.
Explanation:
In marginal costing, fixed overheads are treated as period costs and are not included in the cost of production. This is because marginal costing focuses on variable costs for short-term decision making. Both are true, but R is the underlying principle, not just an explanation of ignoring fixed costs.
No comments yet. Be the first to start the discussion!