Emmanuel Lucas owns and operates Emmanuel’s Shop (a sole proprietorship). An employee prepares a financial report for the business at each year-end. This report lists all of the resources (assets) owned by Emmanuel, including such personal items as the home he owns and occupies. It also lists all of the debts of the business, but not his personal debts.

Required:

1. From an accounting point of view, do you disagree with what is being included in and excluded from the report of business assets and liabilities? Explain.

2. Upon questioning, Emmanuel responded, “Don’t worry about it; we use it only to support a loan from the bank.” How would you respond to this comment?