Business Entity Concept

According to this concept, proprietor and business are two different entities. Business Entity Concept ensures that transactions are recorded from the point of view of business, not proprietor. Now to understand it more clearly let us take one example that shows why we should adopt Business Entity Concept. If an owner take a building of three floors on rent for Rupees 30000/-  per month. And uses one floor for personal residential purposes. In that case the rent being paid from the business cash will be 30,000. But the actual usage of building in business is two floors (rupees 20000/- per month).  So, Only rupees 20,000 should be treated as expense of business not 30000 as it includes owner’s personal rent.