Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 2 - A Further Look at Financial Statements - Questions - Page 74: 20

Answer

Economic entity assumption states that every economic entity should be separately identified and accounted for. The personal bank account or other personal information should not be included in the financial statements of the business financial statements.

Work Step by Step

The example of its violation is the purchase of car for owner's personal use, recorded as business asset the expenses of its maintenance is recorded in income statement.
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