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: 19

Answer

The economic entity assumption means that all the data in a company's financial reports can be assumed to be related to the company and its operations only. In other words, the entity's finances should be kept separate from the finances of other people or companies.

Work Step by Step

An example of a violation of the economic entity assumption is recording personal assets or liabilities as though they belong to the company.
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