A: The Business Entity Concept treats the business and owner as separate. R: This concept is the basis for the Accounting Equation. Choose the correct option.
A.Both A and R are true and R is the correct explanation of A
B.Both A and R are true but R is NOT the correct explanation of A
Explanation:
The Business Entity Concept separates the owner's personal transactions from the business's. This separation allows the business to recognize the owner's contribution as 'Capital' (a liability for the business), forming the basis of the Accounting Equation (Assets = Liabilities + Capital). R correctly explains A.
Explanation:
Abnormal losses are not treated as a cost of production; they are transferred directly to the Costing P&L account to avoid inflating product costs.
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