How it the economic entity assumption applied in the practice of accounting? Sel

Question

How it the economic entity assumption applied in the practice of accounting?
Select one: a. It encourages information to be regularly reported. b. It allows owners and their business to be treated separately. c. It reports key information in terms of its dollar value. d. It allows relationships involving future transactions to take place. How it the economic entity assumption applied in the practice of accounting?
Select one: a. It encourages information to be regularly reported. b. It allows owners and their business to be treated separately. c. It reports key information in terms of its dollar value. d. It allows relationships involving future transactions to take place. How it the economic entity assumption applied in the practice of accounting?
Select one: a. It encourages information to be regularly reported. b. It allows owners and their business to be treated separately. c. It reports key information in terms of its dollar value. d. It allows relationships involving future transactions to take place.

Explanation / Answer

Correct answer is B

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According to this (Economic entity) GAAP principle business and its owner are two different legal entities.

If you setup a business by $100000, then in the books of account $100000 will be treated as liability, the business will be liable to pay you 100000, when you withdraw some amount in the form of drawings, it will reduce your capital.

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