Please advise

The business entity concept (also known as separate entity and economic entity concept) states that the transactions related to a business must be recorded separately from those of its owners and any other business. In other words, while recording transactions in a business, we take into account only those events that affect that particular business; the events that affect anyone else other than the business entity are not relevant and are therefore not included in the accounting records of the business. This concept is very important because if transactions of a business are mixed up with that of its owners or other businesses, the accounting information would lose its usability.

Importance/need of business entity concept

The business entity concept of accounting is of great importance because of the following reasons:

1. The business entity concept is essential to separately measure the performance of a particular business in terms of profitability and cash flows etc.
2. It helps in assessing the financial position of each and every business separately on a particular date.
3. It becomes difficult and impossible to audit the records of a business if they are intermingled with those of different entities/individuals.
4. The concept ensures that each and every business entity is taxed separately.
5. The employment of business entity concept is very general among business organizations. If a company ignores this concept, it would not be able to compare its financial performance with that of others in the industry.

Thank you so much for your conceptual answer. The expenditure is related to my business, but due to some obligation, I would like to make the payment from my personal account and don't want to book expenses in my business account. Can I do that?

I think you can do it if you really want to do. You can also claim the same as reimbursement of business expenses if you want. But what to answer when auditor comes and sees the things/assets/expenses/bills against which no accounting details or bills are there in the books of accounts ?

I think you can do it if you really want to do. You can also claim the same as reimbursement of business expenses if you want. But what to answer when auditor comes and sees the things/assets/expenses/bills against which no accounting details or bills are there in the books of accounts ?

To avoid any answer or clarification to my auditor, I just do not want to take the reimbursement of this of approx. Rs 3000/-, so that there is no reference of this expense in my company's book.

You can search my other question by "TDS u/s 195 & Form 15CA"...this is the main reason why I am avoiding this expense from my business account for now, as my CA does not have any definite standard of doings and not doings for this.

Please refer section 164 of companies act 2013