Question

If Joe Spano, the owner of Spano's Sporting Goods withdrew $4,000 from the Company's Cash account to pay the orthodontist for braces for his teenage daughter, what concept or principle is Mr. Spano in violation of?

Answer 1

Business entity concept

Step-by-step explanation:

The business entity concept means that the business and its owner are separate entities, in other words, the business and its owner are not the same and that business can own assets in its own name.

The capital contributed by the owner is viewed as a loan from the owner and withdrawals from the business by a way of drawings are seen as the owner withdrawing part of its equity in the business.

The money in the business bank account belongs to the business and Joe Spano is not expected to make withdrawals in order to settle personal bills