Elizabeth Watkins owns and operates Liz's Boutique (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 Watkins, including such personal items as the home she owns and occupies. It also lists all of the debts of the business, but not her personal debts.

Required: 1. From the accounting point of view, in what ways do you disagree with what is being included in and excluded from the report of business assets and liabilities? 2. Upon questioning, Watkins responded, "Don't worry about it; we use it only to support a loan from the bank." How would you respond to this comment?