Consider the following statements. 1. The entity concept of accounting is not applicable to sole trading concerns and partnership concerns. 2. Assets are to be shown in the balance sheet at their replacement cost on liquidation. 3. Money measurement concept takes into account changes in the value of monetary unit. 4. When a creditor is paid, this results in decrease of one asset and a corresponding increase in other asset. Which of the statements given above are correct?

The correct answer is D. None of the above.

1. The entity concept of accounting is applicable to all types of business entities, including sole trading concerns and partnerships. The entity concept states that a business is a separate entity from its owners. This means that the business’s assets and liabilities are not the same as the owners’ personal assets and liabilities.
2. Assets are to be shown in the balance sheet at their historical cost, not their replacement cost on liquidation. Historical cost is the amount of money that was paid for an asset when it was acquired. Replacement cost is the amount of money that would have to be paid to acquire a similar asset today.
3. The money measurement concept does not take into account changes in the value of the monetary unit. The money measurement concept states that only economic events that can be expressed in terms of money are recorded in the accounting records. This means that changes in the value of the monetary unit, such as inflation or deflation, are not recorded in the accounting records.
4. When a creditor is paid, this results in a decrease in one asset (cash) and a corresponding decrease in another asset (accounts payable).