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Economic Entity Assumption

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Economic Entity Assumption - Page Text Content

S: Canadian Business

BC: Canadian Business | Special Issue

FC: Canadian Business | Special Issue | GAAP | Economic Entity Assumption Pg. 23 | Top 100 Wealthiest Person- Pg 50 | Ideas that will work -Pg. 30

1: CONTENTS | cover story | GAAP: Economic Entity | 23 | features | How to say no to your customers | 56 | Top 100 Wealthiest people | 50 | Ideas that work | 30 | feature ad | Ask a pro | 45

2: Cover Story: | Generally Accepted Accounting Principles | Is the Economic Entity Principle been followed? Is there an increase in violation? | Is there a GAAP that seems to be confusing sole proprietorship businesses or any business?

3: The economic entity states that businesses must keep their transactions separate from their owners’, business units’ or other businesses’ transactions | Economic Entity Assumption... What is it?

4: Major Concern of the Economic Entity Assumption | The economic entity principle is a particular concern when businesses are just being started, for that is when the owners are most likely to | commingle their funds with those of the business.

5: How to prevent violation | In order to prevent violation of the economic entity assumption from occurring: * maintain separate accounting records and bank accounts for each entity *do not intermix assets and liabilities of its owners or business partners.

6: Common | Business owner adds his home to his business asset account. An owner charging their expenses on the company would be violation of this assumption. In a merger or acquisition, the companies would be considered as separate entities.

7: Making a comeback from the violation of: | Economic Entity Assumption | A trained accountant must be brought in after a business begins to grow. In order to sort through earlier transactions and remove those that should be more appropriately linked to the owners.

8: Role of Ownership | Business Entity Assumption does not ignore the fact that a business and its owner are inevitably tied together in certain ways. | However each transaction still applies to either the business or the owner. | The principle applies to partnerships, corporations and even sole proprietorships.

9: Benefits of the Economic Entity Assumption | This principle allows accountants to examine businesses in isolation, regardless of their ownership status. | Another benefit of business entity assumption is the guideline that every transaction must be assigned to a single entity. | This prevents accountants from needing to deal with overlapping or duplicate accounting entries.

10: Feature Story | In an action that sent shock waves through the French businesses community, the CEO of Alcatel- Alsthom was taken into custody for an apparent violation of the economic entity assumption.

11: Allegedly the executive improperly used the company's funds to install an expensive security system in his home.

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  • By: Cindy N.
  • Joined: over 6 years ago
  • Published Mixbooks: 1

About This Mixbook

  • Title: Economic Entity Assumption
  • What is Economic Entity Assumption? Violation/ how to prevent them Examples of Economic Entity Violation
  • Tags: None
  • Published: over 5 years ago