• Though the proprietor or owner is the legal owner of the business, owner and business should treated two separate entities (Separate entity concept). 

• Business transaction are recorded in the view point of business not in the view point of proprietor. 

• The various terms used in a transaction such as commenced business, started business, capital introduced, capital brought in, etc. mean one and the same thing (capital) similarly withdraw, personal drawing, private purpose etc., are drawings a/c.

• Money borrowed from any outsiders including wife, relative, friends, should be treated as ‘loan’ account, similarly given also (loan given). 

• Goods a/c – opening stock, purchases, sales, returns outwards or inwards and closing stock must be recorded as purchase, sales, purchase return and sales return respectively. 

• Purchase of Fixed assets should be recorded in fixed assets name only and it should not be recorded in purchase book 

Example : plant and machinery a/c 

• Cash paid or received from parties against the services is not recorded in their personal a/c (names) but in the name of services 

Example : salary paid to ‘x’ a/c 

• Trade Discount should not be recorded only cash discount should be recorded. 

• Some times the transactions are not clear. In that case the correct meaning should be understood. 

Examples, (a) Purchase goods, not clear about cash, or credit. It should be treated as cash transaction. 

(b) Purchase goods from ‘Y’. It is treated as credit transcation. 

• Expenditure on fixed assets should not be recorded in the name of assets but in the name of service ‘Repairs and maintenance’ unless otherwise stated clearly.